Although I don't get continuous windows, I do get the initial "Do you want to save these changes?" window whenever I open a Word document and try to close it without having made any changes. I've always thought it was just a bug in MS Office...there are plenty of those...and I just ignore it and sometimes I say "Yes", sometimes "No", but my document is always there the next time.
The first thing I would ask...do you have any of the SPs for MS Office or Word installed? You know, those programs have updates (both critical and noncritical) just like Windows.
The second thing I would ask...have you tried uninstalling the offending application and reinstalling it? That's my typical (if erroneous) way of dealing with program bugs. If that doesn't solve it, I look for updates, download same and install same.
The one other thing I think you can do is to check Event Viewer for any errors involving the Office suite. If you see any, those would be clues that either uninstalling/reinstalling or updating (or both) may have some value.
How To Use Event Viewer - http://www.bleepingcomputer.com/forums/t/40108/how-to-use-event-viewer/
I will add...the only time I've ever experienced cascading windows (that may be the wrong phrase) of any sort...involved what I considered attempts to hijack my browser. Never when not in IE.
If you think it's XP, then it might be wise to run chkdsk /r on the system. Start/Run...type chkdsk /r (with space between the k and the /), hit Enter. Type Y, hit Enter. Reboot and let it run to completion, it will reboot when done.