Microsoft Office XP automatic update seems to be causing issues :

Problem:

Office applications locking up when trying to save files in other than the default location (Freezes after slecting drop down box to choose different folder)


Solution:

System restore to the day prior to the issue beginning seems to resolve the problem.

We've also seen success with going to ADD/Remove Programs, sort by date last used, check "SHOW UPDATES". Under Microsoft Office, look for security updates ( date on which u have perf updates or later ) , & uninstall them. After you uninstall the updates, set Automatic updates to Prompt when downloaded, reboot & see if the problem is resolved.

Some of the suspect updates are:

Vulnerability in the Microsoft Data Access Components (MDAC) Function Could Allow Code Execution (911562) (Primary Suspect)
Cumulative Security Update for Outlook Express (911567)
Windows XP and Windows Small Business Server 2003 Security Update (908531)