The MSR-MT team blog announces that Windows Live Translator is coming to Office 2003 or 2007 as a Research pane option (integrated into Office!).
“One of the top features that our users ask for is simple integration of translation into Office, to translate a document quickly. The feature is really easy to use, and you can translate a block of text or an entire document, from within Office.
We have officially handed over our code to the Microsoft Office team for the integration of the translation tool directly in the Research Task Pane. Once they have finished their own testing and "flipped the switch" on their side, the feature will auto-update in existing versions of Office. I'll blog about that here again when that happens - at that point, no additional setup steps will be necessary.”
More info: Office 2007 Setup Instructions