Word 2003 hangs but only under certain user account

We are using the API to convert to PDF. Calls are made to the COM object from our own application which runs as a service. We have a special account called AppService which is used for running applications as a service.

On our dev Windows Server 2003 everything works fine, but on our production Windows Server 2008 R2 there is no PDF output. I noticed in the Task Manager that Winword.exe hangs.

This is only when the application runs under the AppService account. If I change the service to run under my own account everything works fine. But this is not the solution.

I have also added the AppService account to the local Admin group for the server but this has still not fixed the problem.

Any help appreciated as I have been trying to fix this for days!