I've been given the starter kit for Christmas and got it out of the box. I can load 'Blink' change its delays and upload it again fine. I have written a short sketch using the IDE myself, but if I save it it saves as a .doc file not an .ino file and I can't upload it. There must be some little click I'm not making. I have two books on the subject and I've done everything they both say.
I don't think it's possible for the Arduino IDE to save sketches as .doc files. Show us screenshots of the process.