There's a complex dynamic here
I think there's a very complex dynamic going on here.
MS Office is the de-facto standard, and nothing is going to displace it in the corporate environment in the foreseeable future. However, Office is also a train-wreck from a software POV, partly due to it's age and Microsoft's laudable policy of not breaking backwards compatibility while adding increased complexity.
Everyone talks about how feature-encrusted Office is, and how they'd like a leaner, simpler system that just did what was necessary, but what's necessary is different for every user.
I think what Apple is trying to do with iWork is provide software that superficially looks like it is serving the non-corporate, non-pro users who don't need, and don't want to pay for MSOffice (with the exception of Keynote, which not only competes directly with PowerPoint, it makes PowerPoint look like utter crap). But iWork is also filling a bigger and more important role.
Apple knows that Microsoft's MacBU is going to get the chop. Office 2007 will be the last version of Office for OS X, and it's crippleware to start with (without VB support, it's a complete non-starter for many corporate clients). Microsoft will be telling their Mac-using clients to buy the Windows version and run it under Parallels.
So Apple needs to be able to provide an alternative to Office, without appearing to have driven MS from the platform by competing with their cash-cow.
What I expect to see is iWork continuing to develop modestly, filling the role of office applications for those who don't need the complete feature-set of MS Office (again, with the exception of Keynote, which I see as the flagship app of the suite) until MS announces the end of MacOffice development. At that point, I expect a major iWork upgrade, bringing the apps to near feature-parity with their MSOffice counterparts, and, most importantly, with 100% file sharing capability (which will be possible as MSOffice has been forced to use open standards for their file formats by the EU).
There will still be many shops that rely on VB automation that will be unable to use anything but MSOffice, and Apple simply won't compete in that market. However, iWork will be a viable option everywhere else, and I expect to see some significant improvements in the automation of iWork now that OS X development is starting to slow down.
The bottom line is that for the past couple of decades, Microsoft has had a knife to Apple's throat in the form of Office. Killing Office for Mac would effectively killed Apple. Now that Apple has got it's feet back under it, developing an alternative to MSOffice has to be a high priority as a counter to that long-feared move on Microsoft's part.
What I'd love to see is a version of iWork that people would be eager to use instead of Office available *before* MS kills Office development, but I don't think that's likely to happen.
Cheers
