Richard McManus' Is Google or Microsoft best positioned for Web Office? I say Google is an addition to the growing volume of voices accepting the "when" not "if" of Office 2.0, which I've also written about. McManus supports the Google vision for what seems to be a fairly profound reason: Google is a web company, while Microsoft is (still) a software company.
While I agree that's not a bad argument, the proof is in the pudding. Microsoft has shown itself as being able to move when it wants to move; the question is whether it can move quickly and creatively enough. That's a question more of leadership and creativity than of whether it has historical baggage. Microsoft is capable of quite a few surprises still, it's just that right now, Google is still on a roll and views the web as a vast operating system in ways that Microsoft's mindset still has trouble grasping.
Can Google sustain that momentum? Only as long as people trust the Web. If large chunks of people start mistrusting the web, we're back to software islands. And who will be better positioned for that?