Hi Jonathan,
Thanks for the documents.
So, I tested with the document i.e. Jonathan Glaser - Embedded document issue on the latest version of Current Channel i.e. 2006 (Build 13001.20266) same as yours and I CAN open the embedded Word documents (Test purchase of End Point Detection and Office of the CISO achievements….) without any issue.
I have made a small video for your reference and I will upload it in the same OneDrive link that I provided in my last reply.
Further, to test this, please consider creating a new user account (for the test purpose) on your Windows computer. And check if you can open the embedded documents on the new user profile. Sometimes, a user's specific information may be corrupted, therefore, the embedded file is not opening as expected. In new user account, Word 365 will run from scratch and will help us determine if the issue is with the user profile.
Please check the following article to know how to create a new user account:Create a local user or administrator account in Windows 10
Regards,
Neha