Assuming that you are asking how to insert vowels with umlauts over them,
they are available through Insert > Symbol, shortly after all the standard
English alphabetic characters. This will be somewhat annoying if you need to
do it a lot. You might want to define some macros with keyboard shortcuts to
carry out these insertions.
You will probably want to tell Word that the document is German, so that the
spell-checker can do something useful. In versions through Word 2003, the
setting is under Tools > Language > Set Language.
You can also change the settings in the Windows Control Panel for Regional
and Language options (see, especially, the Languages tab). But unless your
keyboard really is mapped to the German characters, changing the setting for
keyboard probably cause you a lot of confusion.