We also use Word documents as the basis for assignments in SLK. Students open the document from their Assignment Diary and can then save them locally if need be. They have to return them either via email or hard copy in the conventional way.
We still use Class Server for interactive assignments, which can be complleted online by the student and returned to the teacher. Grading the takes plac in SLK and the student receives either the grade or the whole assignment (marked) back.
Although Class Server is a bit clunky, I have not yet found a third party content editor which will allow me to easily create interactive assignments which are SCORM compliant, to unleash on the teaching staff.
I would be interested in knowing about schools who have a facility for student to upload their completed assignments into MOSS for teachers to assess.
Mark