The answer to the question posed in my title is, Yes, it does. Which is to say, the word "AutoCorrect" is included in Microsoft Word's database of words that are deemed legitimate words in the English language, and therefore not in need of squiggly-red-line correction as you type it in a document. Try it for yourself: compare AutoCorrect with LoobyBooby or HarlemGlobetrotters. AutoCorrect is given the green light, while the other two are stopped in their tracks with the iconic red line. HarperCollins -- the publisher -- is, like AutoCorrect, deemed to be legitimate.
I've written elsewhere on this blog about Jacques Derrida's efforts to figure out AutoCorrect on his word-processing program (whether Derrida was using Word or not is debatable -- but it's highly likely that he was). More recently, Chris Wilson has written an article about Word's sluggish updating of its word database. Because Microsoft employs human-supervised editorship of the database, the process of including new words in it is slow and uneven. Wilson suggests that Word adopt a Google way of analyzing the correct spelling of words algorithmically, based largely on the recognition of frequently used words (and their [mostly] correct spellings) online.
We aren't there yet, of course. Which leaves open the possibility to experiment with words (mostly proper nouns) that you think may or may not appear in the Word word database. If you come across a "legitimate" word (using your own defintion of "legitimate" -- it can come from academese or it may be something more befitting of the Urban Dictionary) that has yet to be registered in the database, accept it into your own Word program for Microsoft to consider whenever it uploads user information.
Here are a few approved (+) and unapproved (-), or yet-to-be approved, word combinations that I came up with:
Jacques Derrida (+) vs. Alain Badiou (-)
Frantz Fanon (+) vs. Gayatri Spivak (-) (most South Asian names were rejected)
Blackburn Rovers (+) vs. Wigan Athletic (-)
Radiohead (+) vs. Wilco (-)
Ryan Vu (+) vs. Gerry Canavan (-)
Motherfucker (+) vs. Mofo (-)