Is this a Word 2003/2007 difference or a IE 6/7 difference? You vary 2 variables at the same time, and that makes it a little bit difficult to answer. Maybe the 'correct' question is "Why is Internet Explorer always opening a new instance?".
Can you try it with a link in, say, a mail in Outlook Express?
I have a hyperlink in my word document and when clicked, I want it to use the existing browser (not opening a new browser). I set target="browserA" in the hyperlink properties, and the existing browser has frame name set to "browserA". However, this seems to work fine on my colleague's machine that has IE 6 and Word 2003. But on my machine, where IE 7 and Word 2007 are installed, it always opens a new browser. If I create an HTML with same link manually and click on it, it uses the existing browser "browserA". Why is Word 2007 always opening a new browser?