I had done all of this but it was still saving to desktop. I think I have solved it now though.
You see, when I find lyrics of a song I want on the net, I copy it and paste into a word blank page. But this blank page is one I have on my Desktop, called Blank A4 (original..!). So it seems when I 'save as' it is saving to the original location of the file ie desktop.
I tried doing it to a NEW word doc and it saved it straight to mydocuments/1mydocs/. Then I saved a NEW word doc as a blank page (with margins as i need them etc) to the location I want, and sent a shortcut to desktop. Seems to work.
I would have thought though, when I was using 'save as' i was in fact creating a new document, and it should have saved to the desired location. Anyway, it works this way now!