The Library is a place to share and exchange templates and documents. You will not be able to edit your documents and templates in here but will be able to download MS Word documents and spreadsheets PDF's etc and view them locally and then upload them.
Your "My Email templates" and "My Letter templates" are visible in here for the purpose of letting you move them to another folder for example to make them available in the public letter and email template which all members of your team have access to.
If you try and edit or open them from here you will get an error message. This is working as designed.
Your team member edits a template and it is saved to their "My Email Templates" this means your original template is still intact and a copy has been created in their "My Email Templates" folder.
When they want to share this with someone they can go to the Library tab on the left and by clicking on the little arrow next to the template and can move it to another location such as the main Library, You could also have moved it to the main email template location in the same way. Your team can collect a copy from the main Library by moving it in the same way to their My Email Templates if they want to make alternative versions for their own usage.
If you upload a .DOC or .xls these will only be stored in the library, they are never going to be available as a merge document or template and they will not show when you go and look in your "My Email Template" location as WiredContact will only show items with a .WEML extension.
This is covered in more detail on page 89 here
If this remains an issues you are sure about please contact firstname.lastname@example.org as it is likely to be a training issue.