Are you using Office 2008 or Office 2011, from the description of the version it seems you are running Office 2011.
Try updating to the latest versions which is 14.6.1 and check if the issue persists.
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I am running 14.3.9. I inserted a small (400 kb) .jpg into my document as a background and added a text box. Then I saved it. The docx file is 1.4 mb. When I save as a pdf it balloons to 4.7 mb.
Some things I tried was clipping the image beyond what was visible, checking the compatibility report, disabling opentype fonts, and reducing the file size from the file menu. None made any difference. When I tried to reduce the file size from preview, it degraded the image too much.
What is going on here?
Thanks.
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Are you using Office 2008 or Office 2011, from the description of the version it seems you are running Office 2011.
Try updating to the latest versions which is 14.6.1 and check if the issue persists.