Is there a way to add expandable thumbnails to an MS Word document?

Depending on how far you want to go to achieve this, you could put your screenshots into separate documents and put those documents into your main Word file. Embedded documents will open in a new instance of Word when double-clicked.

Making the embedded document look good can be quite challenging though. The best way I found was to try to crop it by placing it inside a table with a single cell.

Word simply wasn't made for this.