I have attempted on multiple occasions and on different computers to generate a CHM from a word file. The conversion succeeds with a proper TOC and Index, however the Search feature won't work.
The MSDN HTML/CHM toolkit is installed and another tool I'm using produces a working Search. ITCC.DLL is correctly registered.
I'm using Windows 7, 64 bit edition, SP1. System has 16GB of Ram and is an Intel i7.