Windows Live Translator is coming to Office 2003 or 2007 as a Research pane option. According to the MSR-MT Team Blog, the new feature will be coming out soon as an automatic update to Office:
We have officially handed over our code to the Microsoft Office team for the integration of the translation tool directly in the Research Task Pane. Once they have finished their own testing and "flipped the switch" on their side, the feature will auto-update in existing versions of Office. I’ll blog about that here again when that happens – at that point, no additional setup steps will be necessary.
However you can install it yourself now, if you have Office 2007. The blog post promises installation steps for Office 2003 “later in the week”. The steps for installation are a little lengthy, although not hard, so rather than reproduce them here you can just check out the blog post (currently the screenshots link to an internal website, so they don’t show up unless you’re inside Microsoft, but the steps are clearly laid out).