Importing pictures into MS Word is a huge pain, I haven't really been able to figure it out, but what does work is: make you picture in PS 5 times bigger or so, and in your case b/c you are making letterhead just use the top part and the bottom part and not the whole page. (Do you know what I mean by that), then in MS Word to import a picture INSERT|PICTURE|FROM FILE, then b/c you have made the picture really big you can just stretch its corner out to the size of the windows in MS Word.
But wait, why are you putting this into MS Word, so that you can type and print it from MS Word. Let me explain a few things about that, first of all if you cover the entire screen with a picture you won't be able to type b/c the picture will be in the way, unless there is some way of making that picture a background image. Secondly why don't you just print from photohsop, that would save you way more hastle, just print your letterhead out from Photoshop and then feed the letterhead through your printer again and print your Word file onto it.
I'm an going to quickly explain bleeding. Bleeding is a tenchique used by publication companies to get ink to "bleed" of the page. Example - most letterheads have a bar at the bottom the looks like it got the edge of the paper and then fell off the edge. There is consistant color right the edges. This only happanes when you make the images width and height just a bit bigger to extent past the printable area. Also, printing companies use larger pieces of paper, and print the image, then cut it down to A4 size or whatever size is needed.
In your case (now I'm not sure what kind of printer you have, but most can't really print absolutely zero margins) there will always be the thinest white space. So make your image bigger than the printable area, then set your margins to be the smallest, then when you goto pront, it will say something like: "Image is too big, clipping will occur" or something along those lines, just agree to that, then see how it prints out using Photoshop. MS Word isn't really the best program for printing things like that, b/c you will have to stretch your image out, and pixalation might occur.
Don't forget about paper quality. If you are using white, I would suggest you get bright white semi-glossy at around 40-50 lbs.
Hope this helps!
¡Buena Suerte!