Fixed!
ivanoats, I did end up fixing my launch problem and now have Word and Excel back, fully functional. Here is how I did it, thanks to this thread at the Microsoft forums:
http://cl.ly/2l3f0b0Y311u
First, did some usual maintenance including repairing permissions. This didn't help me, but one should do it.
Then I cleaned out all "bad" fonts, and this was the thing that worked for me. See this article:
http://word.mvps.org/Mac/fontweeding.html
Be sure to click on EVERY font family name in Font Book so that the little arrow beside the font family name points down and you can see every font within the family. I missed doing this the first time, and you often will not see the duplicates if you do not do this. It is extremely tedious, but you need to do it. As you do this, follow the instructions in the Font Weeding article.
In addition to cleaning out - sending to the trash - every single duplicate font, I also selected all my fonts in Font Book (under User), then validated them, then Removed all fonts that had a serious validation failure. If you have fonts that have a minor validation failure that you don't care about, also remove those.
So now you have removed all duplicate fonts and all validation-serious-failed fonts. Now restart your computer. It might take a while since it is rebuilding your font cache. Well, it took a while for me, as I have hundreds of fonts (and got rid of hundreds of bad ones).
At this point, you should be good to go. It looks like Office 2011 just won't work under Mountain Lion if there are duplicate or corrupted fonts, even if those fonts are disabled. Those fonts need to be moved to the trash.
Let us know if this works for you.