Belev Echad: ok here is the real answer.
you do not need to set any settings at all. the person getting the documents should download the Microsoft Office Compatibility Pack for Word, Excel, and PowerPoint 2007 File Formats from Microsoft to read office 07 file extensions with the added x in them (doc is now docx, xls – xlsx). it can be found at: http://www.microsoft.com/downloads/details.aspx?FamilyId=941b3470-3ae9-4aee-8f43-c6bb74cd1466&displaylang=en . (btw, if the person receiving your document had been updating his operating system and office suite like he or she should have, then this would have installed automatically, and they would not have had this problem.)
the reason you should leave the settings the way they are is explained here: http://msdn.microsoft.com/en-us/library/aa338205.aspx. it explains why using file formats that use the open xml format is superior to their old one.