You're asking for something which would be technically very difficult to implement (it would be a nice start if Microsoft released some open source libraries for opening and editing the contents of Word documents, but I suspect that is unlikely to ever happen).
The closest you might be able to get would be to write some code that could connect to Google Docs, upload the word file, edit it in docs, then export it again as a word doc. I'm not aware of anyone who has done that as an assignment plugin (but I could be wrong).
There is some talk about implementing a PDF conversion server that would link in with my PDF annotation plugin. This would allow students to submit word documents, have them auto-converted to PDF, annotated in Moodle, then returned (as PDFs) to the student (which I think is better than returning a Word document, as it means the student is far less likely to resubmit a document still full of your feedback comments). However, even this conversion server is still at the idea stage ...