I couldn't get files from 2007 edited either - had to convert them using a free trial of 2010. Didn't get all several HUNDRED files converted, just a few that I use regularly. Converted by saving as a new file name in a 2010 MS file application. (Word,Excel) Didn't attempt any of my Power point presentations. Kind of lost impetus after discovering the phone with "native mobile office applications" isn't as integrated as it is advertised.
You can create a file on the phone, then upload to skydrive and as long as you ONLY, ONLY, ONLY edit the skydrive version of the phone ( NOT the one on the tile displaying "phone") the file will sync when the phone connects. But IF you edit the file from the phone tile - that will become a completely separate file but will retain the original file name!
The skydrive app is handy as long as you have wireless connection of some sort, but worthless if you don't. Just remember to only edit the files tied to skydrive.
Yeah, a bit of a "what were they thinking???" interaction with WP.