Word could not create the work file. Check the temp environment variable.

A friend of me contacted me and let me know that he was constantly getting an error while opening word, which said "Word could not create the work file. Check the temp environment variable." But clicking through it allowed you to get into word. This happened every time no matter if he was opening a saved document or just starting word with the normal blank new document. Also he lost his favorites, and his history.

The Word error is right. One of the variables is wrong. You need to browse too the registry to the following key: "HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders" Look for any keys that may be pointing to a set location IE: "K:\Todd\Favorites" All entries should use the %USERPROFILE% Variable.

When you find the offending registry keys than you can look around at surrounding ones and most likely correct it. If not then ask in the comments or your friendly tech guy. After fixing these variables you may need to log out and back in. The picture below is for Windows 7 yours may appear differently if working under a different version. Keep that in mind.
Interestingly enough though the locations pointed to a backup external Hard drive. It was pointing to a folder created by the manufacturer backup software. I wonder why this was caused. Anyways it's been a couple of days and no further problems so it didn't revert back.