🚀 go-pugleaf

Assuming you cannot get this working by importing the Word
document in some other way, I would take a closer look on
how the resulting hyperlinks look in FM.

It sounds like the link you get is a working Hypertext link
rather than a cross-ref. Turn on Text Symbols so that you can
see the marker symbols (looks like a "T").
Hopefully, you have a marker symbol just at the beginning
of the "<XREF>" text. Select it and open the Marker window
to check that it's a Hypertext marker of the form "gotolink"
or "openlink".

Try this: put the cursor before the link, search for "<XREF>"
and replace by nothing. Do not manually delete the text, use
the Find & Replace function in FM, and only do it for a single
link. The end result should be that the Hypertext marker is
now placed just at the beginning of the underlined text, without
anything in between. If that's the case, try the link in FM.
If it works, you may have found a simple Find & Replace that
hopefully will work for all the Word-created links.

If the link doesn't work (I suspect it won't), it's probably
because the Hypertext marker has a different character formatting
compared to the link text (no underline). A Hypertext link in
FM starts at the Hypertext marker and ends as soon as any change
in character formatting is encountered, which in your case may
be immediately...

There is a possible way to solve this problem without manually
having to edit each link. First, check if the underlining in
the link text is applied using a character format, or if it's
a manual override to the formatting (select parts of the underlined
text and look in the Character Designer).
If it's a character format, add it to the Catalog by clicking Apply.
You will have a greater chance of success if it's a named format.
Next, select a part of the underlined text and then choose
Edit > Copy Special > Character formatting
Once again, place the cursor before the link and open the Find
dialog. If you think you only got Hypertext markers coming from
Word, search for "Marker of type" and enter "Hypertext".
Alternatively, search for "Marker text" and enter "gotolink" or
"openlink" or whatever you found in the Marker window earlier.
In the replace field, select "By pasting" (this is the trick!)

Do the Find & Replace for the single link. Now try the link in
FM again. If it works, you have found a second Find & Replace
that will make your links working. In the ideal situation, you
can now perform both of the Find & Replace actions on each
document to make all links working. Just watch out for any
other Hypertext links in the documents, like the links in the
TOC or manually created links to web pages etc. You don't want
to change those...

Let us know if it works.

-- 
/Thomas Michanek