Office 03 Spell Checker options grayed out

The add-ons, and add-on manager, have been known to flake out, causing such problems.

Also, you may want to go to Tools, Language, Set Language and uncheck Detect Language Automatically.

This registry entry may be missing:
HKEY_LOCAL_MACHINE\Software\Microsoft\Shared Tools\Proofing Tools\Spelling

If the document is Protected, un-protect it.

Hope something in here works for you.

Oh, and make sure the checker is not disabled, or that "hide spelling errors" is not engaged.

MS Word may have been corrupted.
Do a search for and rename the normal.dot file. Restart Word and a new normal.dot file will be created.

Normal.dot is located in C:\Documents and Settings\"Username"\Application Data\Microsoft\Templates folder. It is a hidden file, so you will have to unhide hidden files. In Explorer go to the Menu and select Tools, Folders Options, View. Check "Show hidden files and folders". Click OK.

http://technet.microsoft.com/en-us/sysinternals/default.aspx

Maybe start with Process Monitor
http://technet.microsoft.com/en-us/sysinternals/bb896645.aspx
and see if you can catch what is happening when the dialog box greys-out.

You can read some of the blog posts as well, they'll give you ideas on how to use these tools to investigate various problems.
http://technet.microsoft.com/en-us/sysinternals/bb963890.aspx