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Unable to open Office files on SharePoint 2010 sites on Windows Server 2008 R2

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Setup: Windows SharePoint Server 2010 sp1 on Windows Server 2008 R2 (hosted on VMWare VSphere ESXi 5.1)
Secured using Domain SSL from GlobalSign.

Client OS: Windows 7 Professional 32bit & Windows XP SP3 32 bit

Browsers: IE10, IE9,IE8

Office: Office 2010, Office 2010 sp2 (both 32bit), Office 2007

Problem Description: Only recently, users started having issues with opening Office files (Word, Excel) on SharePoint sites. When you click on an Office file e.g. Word Document, it comes up with the option to select "Ready only" or "Edit" and choosing either options and re-entering the login credentials results in theapplication hanging. If you leave it for a while (about 5 minutes) sometimes the file opens and other times it gives the error "Could not open https://portal.com/XXX/XXX/Document.docx". Even when it opens, it's extremelysluggish and can't do anything other than end it via Task Manager. Same with excel files. 

This happens to all the users all different OS and browsers.
On XP Pro SP3 w/ IE8, when you click on the file, the login prompt keeps popping back up repeatedly and if you click cancel, the file loads up anyway but no way of saving back onto the SharePoint site.

IMPORTANT: One exception is when logged in as a Site Collection Administrator, itworks like a dream bizarrely!!!! Opens, Edits and saves back fine on the SharePoint site.

Have tried following:
1. Repaired Office 2010 Pro; Uninstalled/Re-installed Office 2010 Pro
2. Reset Browser, unticked automatically detect proxy settings.
3. Emptied OfficeOfflineCache on Client
4. Removed WebDAV from the SharePoint server
5. Added Antivirus folder exclusion (We use SEP 11) on the SharePoint Server

Note: PDF files opens fine for all users.

I would immensely appreciate if anybody has got any advice/pointers/suggestions. Desperately out of ideas at the moment.

regards,

Compter Sez No!


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