I think it compares quite well to Office. Only thing it can't do is spreadsheets, so depending on the person it can be a problem or not.
Keynote for one blows away Powerpoint, I think only a Windows user would only argue that. Getting Powerpoint alone will run you $200. I can't say anything about Pages, but from reading the web site and watching Steve's keynote I am very impressed. It will probably replace Word on my system. Word will run you $200 alone.
Most my average customers simply need to type and recieve Word files. Some do need presentations and some do spreedsheets, but not at as much as people just wanting to type. I can sell them a product that I think is superior than what they are used to for $79 or convince them to get Office which will run them close to $500. Even the edu price of Office is going to be about double of what Apple is offering.
As for your last comment, you are either a pirate or a fan of OpenOffice. As for the time being, I think Apple hit a sweet spot with this package. Doesn't matter if it just came out or has been out for years, good software is good software.
jon