If Word started freezing immediately after updating macOS, I would first check whether the issue is with the Office installation/license rather than your documents.
Try these steps in order:
Update Word
Quit Word.
Open Finder → Applications → Microsoft AutoUpdate.
Install all available Office updates.
Restart the Mac and test Word again. Microsoft recommends installing the latest Office updates when troubleshooting Mac issues.
Check the license/account Since you mention that Word is showing purchase/activation pop-ups, sign in at Office.com with the Microsoft account you normally use for Office and verify whether Word is licensed for your account. A free Microsoft account provides access to Word for the web, but the desktop Mac application requires an appropriate license for editing.
Test Word without the problematic activation state If Word continues to freeze, use Microsoft's Office License Removal Tool to remove the local Office license information, restart the Mac, then sign in again with the account that owns the license. Make sure you know the correct account/password before doing this.
If the problem remains, reinstall Word/Office Uninstall the Office applications and reinstall them from your Microsoft account. Microsoft's Mac uninstall procedure removes the application and associated Office files while leaving your personal documents separate.
I don't see a current Microsoft support notice specifically identifying macOS Sequoia 16.8 as the cause of this Word freezing issue. Microsoft’s current Word-for-Mac known-issues page also does not list this exact problem.
If Word still freezes after updating/reinstalling, please provide the exact macOS version, Word version (Word → About Microsoft Word), whether Word was installed from Microsoft or the Mac App Store, and whether Excel/PowerPoint show the same behavior. Avoid posting your Microsoft account email or license information publicly.