Hey jaypee68,
I have been using a Mac now for about 6 years, and honestly I can't remember the last boxed software package I bought for any of my computers!
Most of the apps that you will need you can find for free, or purchase online!
I'm not sure about converting microsoft works files, but for word processing you could try -
NeoOffice - Free openoffice software for mac, works really well and includes all the functionality your average user is likely to need.
Pages - should be a trial version on all new macs. if not in the applications folder under iWork '08 then it will be on the Leopard install DVD.
iWork isn't free, but you can purchase a key online from the apple store, so you don't need to go anywhere.
As far as paint type programs you again have free and paid options -
GIMP or seashore - Free opensource photoshop like software.
Pixelmator - paid photoshop like software.
Google the suggested software for more details, and download GIMP/NeoOffice to see if they will suit your needs.
Other software to try (just my opinion of the best in each category, others will disagree im sure!)
RSS reader - NewsFire (Free) or NetNewsWire (Free)
FTP - Cyberduck (Free)
IM Chat - Adium (Free)
IRC Chat - Colloquy (Free)
GTD - Things (Free Beta, will be paid software eventually)
VIDEO - VLC player and Perian (Both Free, and will play almost everything!)
TORRENTS - Transmission (Free)
WEB - Firefox 3b4 (Free)
Other software to check out! -
The Unarchiver (Free)
Quicksilver (Free)
SMCFanControl (Free)
Burn (Free)
AppFresh (Free now, paid later?)
AppZapper (Paid)
TextWrangler (Free)
VMWare fusion (Paid)
Flip4Mac WMV (Free)
Secrets (Free)
Macaroni (Paid)
Onyx (Free)
Google Earth (Free)
Skitch (Free Beta, paid eventually)
iStat menus (Free)
Growl (Free)
TextExpander (Paid)
Hope this helps!