Wow, Word 2007 doesn't offer this option. It only took me about 20 minutes of searching before I decided to press F1. I'm pretty stubborn sometimes I guess:
What happened to the From Scanner or Camera option for adding pictures to a document?
The From Scanner or Camera option for adding pictures to a document is not available in Microsoft Office Word 2007. Instead, you can add pictures from your camera or scanner by downloading the pictures to your computer first and then copying them from your computer into Word.
After you download a picture to your computer, do the following:
On the Insert tab, in the Illustrations group, click Picture.
Locate the picture that you want to add to your document, and then click Insert.
This is a big change if you ask me... I used the crap out of this thing in earlier versions of Office.