This issue is resolved.
The problem is a Bluetooth driver
that adds the "Send to Bluetooth" feature to MS Office applications. I was able to resolve my issue with Copy & Paste by disabling the "Send to Bluetooth" COM Add-In in all my MS Office 2007 applications.
The offending driver is used on Intel Desktop boards and is available for download on the Intel Download Center.
The offending driver is the Bluetooth: Motorola* Bluetooth 2.1+EDR USB Device Version 18.104.22.1685 for the MSI MS-3871 WLAN 802.11b/g/n 1T1R+BT2.1 EDR Combo Slim Module.
The Intel Download Center indicates it's valid for all OS and the following Intel products: DP67BG, DX58OG, DX58SO2, DX79SI, DX79SR, DX79TO, DX68BC, DX68ZV, DZ77GA-70K, DZ77RE-75K, & DZ87KLT-75K.
The issue appears to be well known issue. Do a Google search for "Word 2007 copy and paste black (spot, dot, or blob)." It affects Office 2010 as well.