MS Office might have better functionality and file compatibility, but using the touch commands will still be a problem, plus the iPad's lack of a file system, limited memory and processing power will also limit the size and complexity of documents you can work with.
CloudOn is a service very similar to GoogleDocs that emulates Excel, Word, and PowerPoint pretty closely. It integrates with cloud sharing services like DropBox, Box, and GoogleDrive. I managed to create folders ten deep in DropBox and did the same in Box three deep before I got bored. Box seems to be the best suited for work because you can download documents permanently onto the iPad for offline use by favoriting them; the ability to email or send files, links of files, and even folders containing files to collaborators; and an ongoing comment section for each file that everyone with access can see.
Tbh, I think it would be difficult to use Excel very well within CloudOn--they give you some small ctrl, alt, shift, tab,function, arrows, esc, and del keys in a black row of keys above the standard iPad native keyboard, but this is not ideal for Excel work. I think the app is much better suited for Word and PP use. Having said that, it still works and can handle file management. It opened up my docx no problem within Box, although opening in Dropbox didn't keep the right formatting. Box is free for personal use with 5gb and 1 user, but $15/mo. buys you 1TB of storage, 2GB file size limit, and 3-500 user access. This makes the size limit kind of moot. It's the direction that sharing documents is headed anyway, regardless of what kind of device you use to access docs you collaborate with co-workers on in business.
For document creation, I really don't think processing power is going to be a constraint for a significant number of people who would find greater value in the portability, connectivity, and battery life of the iPad. I mean, I guess you can't truly multi-task with the iPad, but many studies have shown that multi-tasking doesn't actually exist as a real human phenomenon. Rather, human beings rapidly switch between tasks that require attention and every time they do, they incur a split second cognitive shift penalty that adds up in time and temporary loss of focus. This is largely why legally people can only talk on bluetooth headsets when driving and aren't allowed to text anymore.
In any case, no, the iPad isn't the best solution for everybody for a netbook replacement. It obviously depends on what your needs are. I think that more people than you think (i.e. none) can use the iPad effectively as a netbook or laptop replacement. This is a function of the work context, work requirements, and values as far as creation devices.