Word 2003 - Importing Pictures

Just stumbled across a problem with Word 2003.

When a user (on our domain) goes to import a picture, via clipart or File.

They receive the following popup (used importing file as an example)

"
Microsoft Word

The graphics filter was unable to convert this file.
(O:\..\logo.jpg)
"

I have read threads on teh web about changing permissions in the registry
and also the "Microsoft Shared/" folder in Program files - to no avail.

This error does not happen as Administrator!

Here are links to show that I have set the permissions right;

<<-- click to expand

&

<<-- click to expand

Could anyone offer a suggestion.

Cheers

John