Sounds like you already know...
"Word is not a typesetting/layout program and they cannot have the InDesign files supplied as a Word document so they can make changes themselves. If I try converting the InDesign document to Word then all the margins, running heads/footnotes, images/layout are not kept exactly as requested."*
I mean.. that's essentially what I would tell them.
"If you want a Word file, I can give you one, but it will not be a designed layout. It will be a text file. Word is unsuitable for professional printing and can not maintain design in many instances. I'm happy to send a Word file. However, you should be aware, at this stage if you were to make changes to a Word file and send it back, it may require me to restart the design processes from the beginning."
Beyond just spitting out a text file from InDesign you can use Acrobat and a PDF to save as a Word file, some type sizing, color, etc. can be retained that way. It still won't be a "great" Word file, but it may be slightly more aesthetically altered than simple plain text. (Generate the PDF from INDD, Open PDF in Acrobat, Save as Word)
Either way, you'll need to educate the client. Like many, they probably just assume everyone uses Word since that's what they use. Most often they are accustomed to editing Word files so that's why they are requesting a Word file. If you take the time to explain that they can mark up a PDF with edits/corrections they may be fine with that.
What you can do .... and keep them happy
I've done this in the past for some client that fail to grasp the breakpoint between a designed layout (Indesign) and a text file (Word)....
- Send them a Word file, and retain a copy yourself.
- Preferably as "plain text" as possible. I like to strip all color and styling if possible. I may leave type size variations so headers pop out a bit more, but I convert everything to one font (Calibri for Word).
- Request that they keep Word's Tracking feature on when editing.
- Let them edit it and sent it back to you.
- When you get a revised file back.. you can check the Tracking feature to see all their changes and then merely implement those in your layout file.
- Should they failed to turn on Word's Tracking.. merely compare documents between what you sent them and they sent back.
You should easily find all the changes and be able to implement them without any need to break your existing layout and start over.
Lastly. some clients may request a Word file because to them, that means they have a copy of your work and they can then use it in the future rather than paying you or someone else to rework things. They may be ignorant to the fact that Word is never used for commercial reproduction. (Well nearly never - realize there's always an exception to every rule). So...
Send them the raw, untouched, spit out, Word file from a PDF. The more elaborate your InDesign layout, the more "wonky" the Word file is going to be. In almost every single case page breaks will be horrible, object positions will be shifted... etc. If they complain, well, there's the opportunity to explain that Word isn't used as tool by professional designers and it fails to support object positioning, CMYK, etc....
If no part of your agreement stated that the client is o receive final deliverables as native files.. then don't provide such files. Any contract/agreement should clearly state what the final deliverables are. In my case, it's always simply a PDF and explicitly never "native" or "working" files.. (relevant question)