Last week I finished installing a new SharePoint 2010 demo environment. As it is a demo environment I installed everything on one server – so Windows Server 2008 R2, SQL Server 2008, SharePoint Server 2010 and Office 2010 on one single machine. Unfortunately when I tried the “Edit in word” option in SharePoint 2010 it gave me an error “Word has encountered an error”. Same if I tried the “New document” option in a SharePoint 2010 document library.
Thanks to Steven for providing the solution – go to File Options> Trust Center. Next click the Trust Center Settings button. On the new screen which pops up – go to the Protected View and unselect all the tree protected view options displayed on the top of this settings page
Close your Office 2010 and try the “Edit in word” option again – you will notice that it works like a charm.