Update : Also check your settings in case you have compression turned off by default, it is turned on and set to dpi in Word Posted in Word. You can see that the original size 1 in the screen shot is some 80 x 60 cm - BIG! You should find picture compression now works correctly.
Here are the details of the photo I inserted into Doc2. When I inserted the picture into Doc2, Word automatically resized it to fit nicely within the page margins.