Yes, I was running WIn Xp PRO in safe mode and Word 2003 control' safe mode...among other tries...
No apps, No custom templetes.
Completely removed Office 2003 2 times now. Removed ALL traces of Office 2003 from Registry and folders and anywhere it would let me. Reinstalled with all updates SP2 and so on. Compatiility PAks with NO success.

Agreed, WIndows XP PRO 2003 seems to be the issue with Word 2003 not being able to open any .docx files.

Paul, do you have any ideas besides wipining Windows XP Pro and starting over? IF not then I agree with your evaluation.
Paul.