Opening Documents in Word Crashes the Server

Question

I posted this in the "Using OS X" forum, since I didn't believe the problem to be OS X Server-specific, but haven't received any response at all. So If no one objects, I'm going to give it a try here:
I'm running OSX Server 10.4.11 (none of the other workstations are affected, so my assumption has been that this isn't a problem with the server software itself) on a MacPro 2 x 2.6GHz with 4GB of RAM.
Here's the problem. Whenever I open Word (11.3.8) or Excel (11.3.7) and try to open a document (whether by selecting Open from the File menu, clicking on the button in the toolbar, or simply starting the application up from scratch), instead of the lovely Open Dialogue popping up, I get the Spinning Ball of Doom. Then the entire system hangs—I can click on other visible applications and the menu bar changes, but those apps are hung too; I can't access any of the menus, the Dock is inaccessible, and attempting to force quit from the keyboard does nothing. And, of course, because this is the server for our small office network, the entire network comes crashing down.
I've reinstalled Office. I trashed the preference and cache files (though the problem pops up no matter what user or group I'm logged in on—and it doesn't affect any of the workstations other than the server, so I don't think it's a preferences problem; still, better safe than sorry). I ran Disk Utility and fixed permissions. No go. Help!
Again, I am fairly sure that this has something to do with Office's proprietary Open dialogue box, because I can fire up Word and—if I've done so by double-clicking on a document in the Finder rather then on the application icon—edit and even save. I can open documents in non-MS applications just fine. (And, as I said, I can open and save Office documents on the other computers on the network.) But open a doc in Word or Excel (or, presumably, PowerPoint), and boom—everything comes crashing down.
ETA: I am able to open the Office Project Launcher application with no problems. So I'm really stumped.
Anyone have any ideas???

Answer 1

So, an update of sorts.
Turns out it's not a total hang—if I leave the ball spinning (for 30+ minutes), the open dialogue finally pops up... but it's in an empty home folder.
We seem to have some sort of corruption of the home folder file hierarchy (there's an odd folder called "99" that appeared on the root of the server's main drive—I can't get access to it, and I don't want to monkey with the permissions until I can figure out what it is) that dates from the same time that our problem popped up. The only thing that I can think of that I changed at around that time was to add a new group home folder. Might I have mucked up the file system? (Shouldn't be that easy, should it? But hey, a little knowledge is a dangerous thing!)
Any thoughts or suggestions? Could the problems (the phantom folder and the spinning ball of almost-doom) be related? Or am I simply dealing with a pair of peculiarities that are unrelated, or that are both symptoms of yet another problem, rather than cause and effect?
Thanks to everyone who's chimed in so far for you input!
But, to reiterate, help!