This does sound odd. Are you able to plot the graph to your Word document without any errors? If so, then the graph is registered on your system. I would try different parameters for the Word Update Graph VI and see if any other settings make it work correctly. It could be that your particular set of choices is causing the error for some reason. Try running your VI without Word Update Graph first, see if it runs, and then try it with different parameter combinations for the Word Update Graph. Let us know what you find.
J.R. Allen