Usual suspects + :
clean out temp folders
depending on OS clean out local documents\user name\temp
check your word installation for where you have set your default directory (if that directories full then you'll hit problems),
is office trying to set CD drive as default - definitely low resources on there (unwriteable)
when you say run it from CD and then from hard drive...are you changing installation between doing this or just switching straight to hard drive and trying it??????
I don't think that the "System dangerously low on resources" is a word specific dialogue, like Weeksy said most liekly a rogue app.
