Spell Check Problem Grammar Options Grayed Out

I have Office:mac 2004 version 11.3.8 on two different macs. One is a MacBook Pro and the other is a MacBook. I have the teacher student edition which provides 3 licenses and product keys. The MacBook Pro spellcheck works fine and the grammar options in Preferences are functioning fine. The MacBook's spell check is not working and the Grammar section is grayed out. I have verified that the language (under tools) for the document is set to default as English US. My dictionary setting under Spelling is set to "Custom Dictionary".

When I run spell check, it says there are no errors but there are. It follows up with a message "The spelling check is complete. Text set to (no proofing) was skipped. to find (no proofing) text, click Edit/Replace, click More, click Format, click Language and choose (no proofing)."

Any advice? I cannot find the problem and verified that all other preference settings are the same in both computers except for the Grammar area that is grayed out.

Thanks