Is it possible to post with Word 2007 via XML-RPC and limit categories by user?

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As per comment it is hard to answer this without knowing specifics of setup.

In general there are two generic approaches to this:

  1. Prevent unwanted terms from being returned by filtering get_terms_args or other available hooks.

  2. Prevent unwanted terms from being saved (or cancel them right after) by hooking somewhere in wp_insert_post().

The more complex, but possibly much more flexible approach would be to extend wp_xmlrpc_server server class so that categories served by it are checked against user permissions.