Save Graphics in PNG Format, Not PICT
The Problem:
I used the "Save As Picture" command in Word 2004 to save a graphic as a PICT. That seemed to work, but when I opened the graphic in Photoshop, it looked weird.
The Solution:
This happens sometimes with the PICT format, whose support in Word 2004 is a little undernourished. Try using the PNG (Portable Network Graphics) format instead, and you should get good results.