See "WD2000: General Information About Floating Objects" at
http://support.microsoft.com/?kbid=268713
Basically, a text box is in the drawing layer and a frame in the text layer.
Consequently text boxes are not displayed in Normal view; frames are. You
have more wrapping options with text boxes, but Word versions before Word
2007 can't "see" text in a text box (even one that is In Line With Text) for
the purpose of creating a TOC, TOF, or cross-reference.
A text box has six circular white sizing handles; a frame has six square
black sizing handles. Both are inserted by default with a black line border.
For the text box this is a "line," which has to be removed by selecting No
Line on the Colors and Lines tab of Format Text Box; for the frame, it is a
"border," which has to be removed by choosing None in the Format | Borders
and Shading dialog or No Border on the Borders palette.
