I have just downloaded and starting to use NUDI. I have some understanding of spoken Kannada. The software is excellent. And very well documented. When you say Microsoft Word and your typing Kannada, I understand you are using Microsoft Windows IME (set thru Regional and Language Options from Control Panel) This uses Unicode fonts that are not as rich in quality needed for Kannada. I am glad that Karnataka Govt. is sticking to using its own fonts. You'll have to get the standard ISCII key board layout - and put that Calc as template. to use. I also suggest that Click-N-Type - a configurable on screen key board be used for precision and matra needed. The best software for Windows is Baraha which has features for font conversion into Unicode whatever.
It is important to understand that there is no such thing as Kannada computing. "Roman letter transliteration" is the via media. Once you can transliteration text - The script and font makes no difference. And if you are dealing with phonetic scripts such as different Indian languages (Including Tamizh) there can always be "script over ride" from Kannada to Telugu.
I have just put a spreadsheet template "You Localize" at http://templates.services.openoffice.org/en/node/8617
and explore the idea of translating all the kannada menus in NUDI 4.0 and knowing what it does as a teaching / learning tool. All the best.