How to embed an illustrator file into a word doc to make a template

I am trying to make a word template for my company's proposals that we send out to clients. I have created the image in illustrator as an 8.5x11 and saved it for 'web & mobile' use with the highest quality setting. I open the document in microsoft paint, copy everything, and then paste it into the header section of my word doc. I choose the option to bury behind text. My problem is that when I paste from paint into word, the document shrinks and is no longer 8.5x11. This requires me to stretch the image, but it pixelates it beyond what I can allow to be used. Is there an easier way to make a word doc template? I am using Illustrator cs4 and Microsoft 2007 (I know, its really really old).

http://office.microsoft.com/en-us/word-help/insert-change-or-remove-background-colors-imag es-or-text-in-a-word-2007-document-HA010097032.aspx?CTT=1 Turn a picture into a background or watermark You can turn a picture, clip art, or a photo into a watermark that you can use to brand or decorate a document. 1.On the Page Layout tab, in the Page Background group, click Watermark. 1.Click Printed Watermark. 2.Click Picture watermark, and then click Select Picture. 3.Select the picture that you want, and then click Insert. 4.Select a percentage under Scale to insert the picture at a particular size 5.Select the Washout check box to lighten the picture so that it doesn't interfere with text. The picture that you selected is applied as a watermark to the entire document. Tip  If you want to use an object, such as a shape, as a watermark, you can manually paste or insert it into the document. You cannot use the Printed Watermark dialog box to control settings for these objects.

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