Hi everyone,
The issue with MS Word for Mac is not so much a problem of input, but a problem of display. Word for Mac uses its own deficient page-rendering engine which won't reliably compose complex Unicode characters like Devanagari conjuncts and the "i" matra. As far as I know, there is no workaround for this, and the issue has persisted through the every new version of Office for Mac. However, the majority of other Mac-specific word processors (Pages, Nisus Writer, and TextEdit, but not LibreOffice/OpenOffice) use Apple's native renderer, which works just fine with Devanagari.
I used Pages for some time, but its inability to seamlessly operate in Word .doc format eventually led me to switch to Nisus.