This is a very common problem when Excel Worksheet or Chart is embedded into Word or Powerpoint. I am seeing this problem in both Word and Powerpoint and the reason it seems is the COM addin attached to Excel. The COM addin is written in C# (.NET). See the attached images for error dialogs.

I debugged the addin and found a very strange behavior. The OnConnection(...), OnDisConnection(...) etc methods in the COM addin works fine until I add an event handler to the code. i.e. handle the Worksheet_SheetChange, SelectionChange or any similar event available in Excel. As soon as I add even a single event handler (though my code has several), Word and Powerpoint start complaining and do not Activate the embedded object.

On some of the posts on the internet, people have been asked to remove the anti-virus addins for office (none in my case) so this makes me believe that the problem is somewhat related to COM addins which are loaded when the host app activates the object.

Does anyone have any idea of whats happening here?