If a user clicks on New from a document library then a word template opens with metadata in the header section, will the SPServices jQuery cascading dropdowns work in the word's header? I doubt it. If not, can I force user to fill out the metadata first when they click on new then open the word template in the word and it should be filled as user already filled the metadata?
No, because the SPServices Cascading dropdowns functions on list forms. To my knowledge, you can't specify metadata before creating a document. You could require check in/out on the document library to force an item be checked in before being available and this would let you use the SPServices cascading dropdowns since that's effectively an editform.
I'm wondering if there's a way to extend the document information panel in Word to account for something like that.