answers inline.

Yes, this is true. Only SQL FTS predicates which are thesaurus aware will
use the thesaurus functions, ie formsof, or Freetext if your search phrase
is not wrapped in quotation marks.

The thesaurus functions of MS Office do not provide services to SQL FTS.
This was not the case in SQL 2000 and is not the case in SQL 2005.

No. Run regmon and you will see that it does not use these files.

It works fine for me and I do not have this file present on my SQL 2005
installations. Could you possible post your thesaurus file here? Note that
tsSchema.xml is a name space. As a namespace the file may or may not exist
on your system or anywhere else. Its just used to prevent name collisions.

here is a code sample which works for me:

--open up C:\Program files\Microsoft SQL
Server\MSSQL.1\MSSQL\Binn\FTEREF\TSENU.XML
--save it as C:\Program files\Microsoft SQL
Server\MSSQL.1\MSSQL\Binn\FTEREF\TSENU.bck
--save it again as as C:\Program files\Microsoft SQL
Server\MSSQL.1\MSSQL\Binn\FTEREF\TSENU.XML
--Replace the contents of it with this
/*
<XML ID="Microsoft Search Thesaurus">
   <thesaurus xmlns="x-schema:tsSchema.xml">
<diacritics = false/>
       <expansion>
           _{Internet Explorer}
           _IE
           _IE5
           _IE6
       </expansion>
 <expansion>
           _Bombay
           _Mumbai
       </expansion>
 <expansion>
           _yogurt
  _yoghurt
  _yohghurt
  _yoghourt
       </expansion>

       <replacement>
           <pat>NT5</pat>
           <pat>W2K</pat>
           _{Windows 2000}
       </replacement>
       <replacement>
           <pat>sex</pat>
           _gender
       </replacement>
       <expansion>
           _run
           _jog
       </expansion>
   </thesaurus>
</XML>
*/

CREATE DATABASE CODE_SAMPLE3
GO
USE CODE_SAMPLE3
GO
CREATE TABLE CODE_SAMPLE3
(pk INT NOT NULL IDENTITY CONSTRAINT PRIMARYKEY PRIMARY KEY,
CHARCOL VARCHAR(200))
GO
CREATE FULLTEXT CATALOG TEST AS DEFAULT
GO
CREATE FULLTEXT INDEX ON CODE_SAMPLE3 (CHARCOL)KEY INDEX PRIMARYKEY
GO
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('sex')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('gender')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('Bombay')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('Mumbai')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('jog')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('jogged')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('jogs')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('jogging')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('Internet Explorer')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('IE')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('IE5')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('IE6')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('yogurt')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('yoghurt')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('yohghurt')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('yoghourt')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('NT5')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('w2k')
INSERT INTO CODE_SAMPLE3 (CHARCOL) VALUES('windows 2000')

GO
SELECT * FROM CODE_SAMPLE3 WHERE CONTAINS(*,'sex')
-- 1 row returned - the row with sex in it
SELECT * FROM CODE_SAMPLE3 WHERE FREETEXT(*,'sex')
-- 1 row returned - the row with gender in it, notice how in a freetext
search a search on sex is replaced by a search on gender
SELECT * FROM CODE_SAMPLE3 WHERE CONTAINS(*,'formsof(thesaurus,sex)')
-- 1 row returned - the row with gender in it
SELECT * FROM CODE_SAMPLE3 WHERE FREETEXT(*,'run')
-- 4 rows returned, all stemmed forms of the verb job
SELECT * FROM CODE_SAMPLE3 WHERE
CONTAINS(*,'formsof(thesaurus,yogurt)')
-- 4 rows returned all spellings of yogurt
SELECT * FROM CODE_SAMPLE3 WHERE CONTAINS(*,'formsof(thesaurus,IE)')
-- 4 rows returned all variants of IE
SELECT * FROM CODE_SAMPLE3 WHERE CONTAINS(*,'"windows 2000"')
-- 1 rows returned --windows 2000
SELECT * FROM CODE_SAMPLE3 WHERE CONTAINS(*,'"nt5"')
-- 1 rows returned --NT 5
SELECT * FROM CODE_SAMPLE3 WHERE CONTAINS(*,'"w2k"')
-- 1 rows returned --w2k
SELECT * FROM CODE_SAMPLE3 WHERE FREETEXT(*,'"w2k"')
-- 1 rows returned --w2k
SELECT * FROM CODE_SAMPLE3 WHERE contains(*,'formsof(thesaurus,"windows
2000")')
-- 1 rows returned --windows 2000
SELECT * FROM CODE_SAMPLE3 WHERE contains(*,'formsof(thesaurus,"nt5")')
-- 1 rows returned --windows 2000
SELECT * FROM CODE_SAMPLE3 WHERE contains(*,'formsof(thesaurus,"w2k")')
-- 1 rows returned --windows 2000