Extensive googling got me as far as relating this problem to the display settings. Specifically. right-click on My Computer and go to the Advanced tab, then click on the Settings button under Performance. The option for Smooth-scroll list boxes has to be ticked for Live Preview to work, either explicitly as part of Custom Settings or as part of Adjust for Best Performance. So far so good – however, I found that whenever I changed these settings, they were not held, so that next time the user logged in the display settings reverted back and Live Preview was unavailable again.

Then came the hard work – was it set in Group Policy? No. Was it possible to fix it using Group Policy? No. Was it possible to nail down the registry settings involved? No. Googling pointed me to some settings, but I still couldn’t get a handle on how to force these settings every time the user logged in.

Finally, the answer – it’s not a server-side setting at all, it’s set in the RDP client! Specifically, in the connection settings for the Remote Desktop client, go to Options and the Experience tab, and make sure that Menu and Window animation is checked!

And voila! Enable Live Preview is checked in Office 2007 using Remote Desktop to a terminal server!