I'm not a programmer, so I don't know the specifics but what you're looking for is an "event handler" or "event sink." If you google "sharepoint event handler" you'll get some examples on how they work.

Isn’t that over-engineering it? To launch Word/Excel, just stream back a DOC/XLS content type. That’s how SharePoint is launching Word.

It’s streaming back a DOC, when your browser gets it, it recognizes that your desktop has been configured to open DOC files in Word, hence it launches Word.

I didn't get you. What does tracking  list entry  changes has
to do with word/excel?

I didn’t say anything about tracking  changes. All I’m saying is that thing that’s triggering Word/Excel to launch on the client’s machine is the fact you’re streaming a DOC/XLS back to the client.

You can sign up for alerts so that you get an e-mail notification  if it is enabled on your server. Any changes to the list  and you'll be notified. I'm not sure about the person receiving the task  unless they are subscribed to alerts.

In order to create  an automated system, you need to trap events. Unfortunately, this will only work on document libraries in 2003. The 2007 version will allow you to do this with task lists.

Yup, I sure did… looks like I hit reply on the wrong email  in my original response.

Surely I wanted  to have
an automated system  where in a user  who creates a new item into the
list, maybe a issues list, gets a user friendly message.

Once that issue has been resolved or maybe the status of the request
changes from say, OPEN to CLOSE, the user is again alerted by an
email notification. Something similar to any defect tracking  system
(eg. ElementTool)