Mendeley still doesn't have a Word plugin for making citations. I tried for a while to sort out Endnote X2 with word 2008 and gave up. I followed all the suggestions I could find in the Endnote help and the EndnoteX2 submenu in word still didn't appear.
Zotero to the rescue. I installed Zotero version 2.0b6.5 and and the Mac Plugin for word 2008 and hey presto, it works! It works fine so it will do for now and I might be converted.