"I used an image that was only 2.75" wide x 5" deep and it came back at 2
1/4"wide X 4 1/4" deep.
And those were the actual dimensions shown on the ruler at the top of the
Word document when the item was inserted. However that ruler is way out of
scale. HELP!!! "

Are you referring to measurements taken off your computer screen or
measurements taken from a printed document?

Images and their print size are measured in pixels.
80 pixels used to be a gauge for approximately one inch. With today's larger
screens, that one-inch pixel size has changed, all dependent upon the
display resolution your screen is set up to display. (I've seen some newer
references for 86 pixels.)

Some suggestions:
1) Size your image your image (with a non-Word) graphics software to fit
within the parameters of your Word layout [width and height]. It would
surprise me if your able to use anything larger than 400 X 400 pixels
effectively!

2) Than insert the previously saved image into Word.