MS Office is expensive. I use MS Office 2003 on my Windows partition.
.doc is the most common used file type. Most businesses and users use it today.
If you don't need to use MS Office, then iWork is pretty good. It's cheaper than Office, can save into .doc format, and is fairly powerful. I used it here and there during my trial, and thought it was pretty good. Keynote is easy to use, imo, I like it over PowerPoint.
NeoOffice is free. I haven't used it. I haven't used OpenOffice for a couple years or so now. Back then, it couldn't open/save .doc files properly. It had issues with formatting.
There could be compatibility issues if you share files with an MS Office 2007 user. MS Office 2008 for Mac should open these files fine, but MS Office 2003 may not even properly convert MS Office 2007 files.
hope this helps some.