For the sake of others reading this: As of today, Word XP spelling is currently broken in Windows 11 and there is nothing you can do about it. Compatibility & Safe Mode etc will not help you..
Dear Richard thank you so much for you help!
Following your suggestions, I disabled hardware graphics acceleration and ran in 640x480 mode with Windows XP SP3 and safe mode all enabled and it still failed! Again I can see the correct spelling but I can not click on it. I upgraded another very different machine from Win 10 to Win 11 this morning and it was working then i got a update and it broke. I tried to roll back the updates and it failed and now the machine needs to be rebuilt. So this issue is surely not harware specific.
I think Microsoft should be more open about which update is breaking Word XP and if users can block it and if Microsoft are going to fix it. Clearly they know about the issue but this is the only public thread I can find on the internet that talks about it so far.
I love Office XP and I only use it internally so no security issues for me. The whole argument Windows 11 does not supprt old software is nonsense- that is what compatibility mode is for and Offce XP is the most famous old program of them all. Some Excel XP VBA / XLL projects are especially important to preserve.
So what do do? I am going to downgrade to WIndows 10 for now. Its got another three years of support available from Microsoft for $60- maybe they will fix Office XP before support ends. If this problem has been widely publicised I would not have upgraded in the first place.
!!! OFFICE XP LOVERS BEWARE !!!
Notice my love of "Traditional Power User GUI" in the photo! No Word toolbars, Classic Shell, Xplorer2. Oh how we traditionalists rue the new culture of populism and pointless change at Microsoft that grew up in a twisted response to Steve Jobs' designerism..