(See WORKAROUND at bottom)

Review the original problem:

Start Word, new document. Default paper size: 8.5 x 11
Margins: Top and bottom 1, Left and right 1.25

Change paper size to 7 x 9

Word shows message A: "One or more margins are set outside the printable
area of the page. Choose the Fix button to increase the appropriate margins."

$ Question 1: What is a "printable area"? Look in Word Help; it's Not Found.
Technical terms in messages should be defined in Help; this is a Word problem.
 
$ Question 2: What is the specific printable area in this case?
If Word determines this from the print driver, why can't Word display it to
me?  

$ Question 3: Which margin (shown for 8.5 x 11 doc) is "set outside" the
"printable area"?  If Word determines this from the print driver, why can't
Word tell me which margin is a problem?

I then clicked Fix, as Word told me to do.

Word changed the margins to: Top 1, Bottom 9.5, Left 3.75, Right 3.75.

$ Question 4: On a 7x9 document, how did Word calculate each of these
margins? Even a new user can see the Bottom, Left, and Right margins are
INVALID. Word approved the changes knowing the doc size, so it's another Word
problem.

After clicking OK, Word shows message B: "The settings you chose for the
left and right margins, column spacing, or paragraph indents are too large
for the page width in some sections."

$ Question 5: Why does Word blame me (the settings YOU chose) for changing
the margins?
I did not enter the new margins. The only other party here that I know about
is Word. Word told me to click Fix. As a new user, I know nothing about Word
interacting with print drivers.
A more accurate and helpful message is: "The current print driver has
determined a new Left margin value, which is invalid. For more information,
see Help under xxxxx."

$ Clicking on Ignore, and then entering data into doc, do Print preview, the
data is not there. Ignore evidently means more than simply ignore the
message.  

WORKAROUND

Lexmark Tech Support suggested this:
Go to Control Panel, Printers, Properties (of specific printer being used),
Printing Preferences, Paper Setup. Select Custom size, enter 7 x 9.

Repeat exercise in Word. Now I do not get message A.

Then I go back to Control Panel and change back to standard Letter (8.5 x
11).

Repeat exercise in Word. I still do not get message A.
In Word, change paper size to other custom sizes. No message A.

What has happened? It appears that going into Control Panel and specifying
7x9 custom size has told Word that ANY custom size is OK from now on (even
after Control Panel shows standard Letter again).

And I do not know how to make the problem occur again.
This also causes confusion!

I would like to get more information about the relationship between Print
driver, Control Panel, and Word. For example, did Control Panel change the
print driver? What exactly does Word consult to determine "printable area"
and valid margins? Is it not reasonable to want to understand the rules?