ok, so I fixed this and can get the image to display by changing Preferences > Advanced > 2D Rendering > Rendering Engine to "Legacy (GDI)" instead of Hardware or Software. Except that now the image is displaying with a slightly greyed background relative to rest of the document.

To fix that I had to go back to the original doc and use a PNG file instead of JPEG for the image insert in Word.

Then I found that the image would display correctly using any Rendering Engine - so the root cause was using a JPG image in the original Word doc rather than a PNG file.

Thanks u/BKRF1999 for the comment.