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Note that when you add a Contact (or any other RI item) to an Account, the Account object doesn't register an update to the main page. Only when you actually update something on the main Account page it counts as an update. So your workflow for Account object wouldn't trigger when you add a Contact under it. Either there is insufficient privileges in the access profile for creating a Contact RI under Account, or you have some other workflow for "When New Record Saved" for Contact.
Need more information to give correct advice.
There are two parts to your question:
1. You created a workflow to update region for reporting before modified record is saved
Not sure which record type the workflow is based on, or how this is causing an issue.
2. Update to Account fails when user with read-only access to Account adds primary contact.
Well, this is how the application works... adding a primary contact causes the contact id to be be inserted into the account record. This is done to ensure performance of searches and lists when the primary contact is specified. This update conflicts with the read-only rights of the user and the contact cannot be added correctly if the contact is being added from the contact child applet on the account detail page. However, if the primary account of the contact is specified from the Contact detail page, it updates the Account correctly. I think this is a bug and you should report it to Oracle customer care.