I created an Excel file and Word file in Office2021 on Windows 10. The Word File contains <paste><Special><link>s for a bunch of Excel data: cells, ranges, and some charts.
The user who updates the spreadsheet is using a Mac with Office365. The Word file is not updating when the user adds data to the spreadsheet.
Both files are in the same folder on the Mac, and Office365 DOES ask them "Do you want to use links?" when opening the Word file. They are following the same set of steps I use when opening the files, or changing data. It works for me.