Can you insert a PDF into Word??? I don't think you can (but I could be wrong).
You are going to have to go via the route ID>PDF>a graphic format that Word will accept. If the letter head is purely vector art (e.g. logo) and text, then I would suggest:
(1) convert all text in the ID doc to outlines, since you cannot assume all computers that will use the Word template will have the right fonts - now everything is a graphic
(2) make a PDF from ID (probably Print quality is OK)
(3) open the PDF in Illustrator
(4) size the graphic to the size it wil be used in the Word template
(5) export as a PNG with transparent background at around 200 dpi
(6) in Word, insert the PNG into a header, and save as a template.
By putting the graphic into a header, it will be dimmed on screen (as all Word header/footers are in Normal view), but it means that the box/frame into which it is inserted will not interfere with normal text added by the user to the template.