Assuming no other apps have the all-caps issue? Like, TextEdit shows regular key case? Indicating it's a MS Word thing, not a system-wide setting.
Do saved files behave the same way if you start adding new text?
If you paste normally cased text into a new Word Doc, and then continue typing?
If you copy a block of all-cap text from the MS Wrod Doc, paste into TextEdit?
It is possible to invoke allcapedness on purpose, even as a default. Note that Word has a setting that enables automatic updates to saved style sheets when you make changes in the document as you work, and maaaybe that worked its way into your personal new-document default template? Stranger things...
My first instinct would be to confirm what style sheet is the new document's default. Typically it's "Normal" or "Body". See if those style sheets got set to All Caps in Font setting.
If you don't have any particular investment in your default new document template - "Normal.dotm", you can just try deleting it and a new one will be created the next time you quit MS Word. On my machine, my personal templates are in Users>[USER]>Library>Group Containers>[alphastring].Office>User Content>Templates
But that still leaves MS Word's application-level templates.