Gman,
Yup, I have the exact same problem, but mine happens in Word too. We have
coworkers collaborating on a document, but when I go to do the final review,
all sharepoint hyperlinks (Intranet) are converted to C drive links and are
unusable.

I am going to play with some document library settings. I seem to remember
a setting that allows checked-out documents to be stored on the local drive
until they are checked back in. I wonder if that is causing the
problem....For me, it is very frustrating because some documents have
literally a hundred hyperlinks to internal forms and info.

Funny, the internet (external) links don't get changed at all.