I agree with philhege's suggestion. It should do exactly what you want from within SharePoint's built-in functionality.
As a follow-up, I would suggest that you check the template path for the document it creates (in Word, Tools -> Templates and Add-Ins). If it includes the full http: path to your SharePoint site and a copy of the document is sent to people who can't access the site (or who are outside your company), Word will error when it fails to find the template.
Also, don't forget that you can create more than one document type in a library, which will manifest as different templates (be they Word, Excel or whatever). That's certainly true for MOSS 2007, not sure about Portal 2003 or SharePoint Services.
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