excluding Windows 7.pvm from Time Machine
Yes they should get backed up, since your MS Word and Excel files are located in your Mac User Documents folder and not the Parallels .pvm. If they were located within your Parallels .pvm and it's excluded, then they would not be backed up.

The .pvm file essentially acts as the hard disk drive for Parallels, and is basically a separate container that exists somewhat isolated from your Mac's environment. It can share files and folders with your Mac, although anything outside of it's .pvm belongs to OS X.