The Database file is located inside the Identity folder. The Identify folder
is the same name as listed in the Identites dialog (which comes up when you
switch identities or use the Database Utility), and lives in
~/Documents/Microsoft User Data/Office 2004 Identities.
For non-UNIX geeks, the tilde represents your home directory, i.e.,
/Users/<nameofuser>; in the Finder, when you have the list of drives and
directories on the left (whose visibility is toggled by the button in the
upper right corner of the window), it is the directory with the little icon
of the house.
If, after compaction using the new Database Utility, you can still not open
the identity without the beachball lingering for minutes (or longer), and
verification of the identity (also in the Database Utility) does not show
corruption, then I would be interested in a copy of the identity to try and
see what is going wrong.
-nh