Assignment

You might want to consider the online PDF marking assignment module.
http://moodle.org/mod/data/view.php?d=13&rid=2350&filter=1

MS Word files are often much larger than files with same information in other formats, there are format issues doc vs docx
I have also used an OpenOffice macro to markup pdfs

I did post some notes a bit ago about php based applications (such as a php spread sheet) that one could arguably integrate with Moodle and of course, if you can use Google Docs which makes everything much easier, especially if you sync up a google apps domain. The latter is very nice in that google docs tracks changes and allows comparisons, as well as provides you with the ability to add notes. There is no uploading downloading involved and students can collaborate on a doc as well.

WHile Google docs will often give people headaches because of style sheet issues, I think the apps will continue to improve and for those using style tags it wouldn't hurt for them to have a bit of a lesson in using CSS