You don't say which client you're using - the Explorer client (/alfresco) or Share (/share). With Share it would be possible to disable the download link in the UI, but wouldn't stop someone from downloading the content if they knew the URL. The problem is a browser needs to download the content in order to display it. However, when the content is downloaded as a Flash movie it makes this process harder (although still not impossible).
The Office add-in doesn't disable any part of the standard Word toolbar - that's not it's purpose. You could extend it to do that, but there are other way Microsoft have provided, such as saving documents with a password so they can be read but not written.
Mike