Hi Tim Walton Stockfilms,
I don't know if you have reviewed the articles provided by Vishwanath V.
Specifically the article
Description of how Word creates temporary files
http://support.microsoft.com/default.aspx?scid=kb;EN-US;211632
One of the point the article describes is that every time a document is opened in Word a temporary file is created.
Word and Excel have always functioned this way and it is part of how the document recovery feature works.
Based on the information you provided my guess is that your Windows XP users have a different temporary file location than the Windows 7 users.
As an administrator you can determine the path on each user account easily by logging in as the user, then open a command prompt and at the command prompt type in 'set'.
You will get some very interesting information and you will also get the default path for each users temporary file location.
One additional word of warning, the set command can do a lot and therefore can break things. Please use it with caution.
If you want to know more about the set command there are numerous resources online and you can always use the command 'set /?' and get a return of all the variable available with the set command.
Let us know if this helps.