The behaviour you're seeing in Word 2007 exists in the later versions also. As you drag a corner or side of the image, a ghosted version of it should appear overlying the original, this showing the resizing effects as you make them. If you're not seeing that, perhaps your graphics driver needs updating. Check, too, whether you have disabled hardware graphics acceleration (see under File|Options|Advanced>Display).

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Cheers,
Paul Edstein
[Fmr MS MVP - Word]