My roommate just had this problem with Microsoft Word 2003, and I found the fix using the Google search engine. Here’s what you do:
Tools -> Options -> Edit
Check “Typing Replaces Selection”
That’s all my roommate had to do. For the sake of completeness, the fix also says:
Tools -> Options -> General
Uncheck both options that have WordPerfect in them
Hope this helps someone.

Thank you! You made me look like a hero in my office because I used your advice and fixed this for my coworker. She’s so happy now. Grateful in Japan…Kris
Excellent, thanks for that!
OMG! Thanks!!!!
THANK YOU SO MUCH
sweet jesus…thank you