As I wrote long ago, Google Documents has an inferior user experience because it tries to do word processing in the browser without a plug-in such as Flash. Now, Microsoft is announcing that they will be bringing Office to the browser. Rest assured, that Microsoft's new web Office suite will use Silverlight, their Flash competitor, and will therefore not be hamstrung by the insufficiency of standard browser rendering.
Unless HTML is changed radically, (and given the politics of HTML 5 that seems unlikely in my lifetime) it will be impossible to build a good word processor based on HTML.
Google has been almost religiously opposed to using Adobe Flash for anything but video. But now that Microsoft is about to bring out a web based office suite, Google is going to have to decide what to do here. If they remain on their current, pure HTML-based course, and Microsoft moves to Silverlight, Microsoft will eat Google's lunch. There is absolutely no reason to use Google's platform if Microsoft's web Office does what Google's apps do, but behaves more like real desktop applications - and in fact behaves more like the real office. Google can never achieve this type of user experience with an HTML only strategy.
The stakes here are significant. Google wants to be competitive in the office document business, but adheres to a religious philosophy that almost guarantee's long term failure. But Google has become a very big, much slower moving company. I am curious to see if they can adjust their religious phliosophy sufficiently to play in this market once Microsoft launches their web Office products.