The importance of keeping your distributed docs up to date, as described above, deserves emphasis. It's highly frustrating try to program to an API with an old version of the documentation.
I also agree that Word is a lousy way to produce this type of documentation. I would go further and say that it is a poor tool to use for most non-static technical documentation. It's update capabilities seem well-suited to more narrative documents but are cumbersome and confusing for technical documents.