Addendum: Using Windows 7 with Office 2010. Quark was tested in Windows XP Virtual Machine.
The problem isn't with the font. And the same symptoms occur with many other fonts from Adobe and other type foundries when used with Microsoft Office products.
With OpenType fonts, many more font metrics are available to application programs under Windows than are available with Type 1 fonts (the fonts you refer to as PostScript fonts - the fact is that Type 1 and TrueType fonts are all PostScript fonts). The additional metrics available include information about the height of the “tallest” characters in the font.
InDesign sets its automatic line spacing, i.e. leading, based upon a multiple of the point size, typically 120% (this percentage is set as part of the paragraph style), a very common value used in setting type. What I suspect is happening is that Microsoft's internal text engine is being clever and trying to avoid a situation in which any of the characters used in a particular font would overlap between lines and instead of choosing a multiple of the chosen point size, it chooses a line spacing based on the height of the tallest glyph or 120%, whichever is greater!
The information that you received from MyFonts is absolutely wrong. They may not license the older Type 1 versions of the font, but Adobe does at <http://store1.adobe.com/cfusion/store/html/index.cfm?store=OLS-US&event=displayFontPackage &code=391>. Note that in Type 1 format, Galahad requires three separate typefaces to include all the alternate and special characters that are in the single OpenType version of the font.
At Adobe, we would strongly recommend that you use the OpenType version of the font, at least for new documents. Type 1 fonts for purposes of application use has been deprecated and although Adobe will support those fonts for the long term in its applications, we cannot guarantee that Microsoft or others will do the same. Also, the OpenType font provides support for a wide range of features available in Adobe's applications including the old style figures and alternate characters available in Galahad.
Note also that the OpenType and Type 1 versions of Galahad do not share the same name. As such, you could have both installed and not have to worry about accidental reformatting issues.
Thanks, Dov. That was both helpful and very educational.