When you check  out the document  from v2 are you using the portal
site or doing it through the office application? If you are using the
web site once you check it out you can then select the document and then
go and say edit document in office application that will open up the
doucment and allow you to do a save  as or edit it. Microsoft has gotten
away from making you save the document locally and is now using the
server as the place where work on the document occurs.

Do you also know how the searches work? I have a few documents  in the
portal, but when I do a search, nothing comes up. I have set it up to
incrementally index every 5 minutes.

Have you set up the propogation of the indexes? If so then I am not
sure what is happening. One thing to make sure is that the documents
are of types that can be indexed like Word, Excel and that sort of
thing. Other then that I am not sure. I am looking into that as well
and if I come up with anythign I will let you know.

How do I set up the propogation of the indexes? They're all Word
documents that I'm using.

Here are two places to check  if you go to
http://<server>/_layouts/1033/SearchSettings.aspx you will see a number
of settings that you can modify. Make sure that the location of your
work documents  is being indexed. The second place you should check to
make sure the index is being propogated is:

Go to the SharePoint Portal Server Central Administration then under
Component Configuration choose Configure Search and indexing. Under
that there is a section called indexes click on the manage propogation
link and that will let you see if they are propogating correctly.