While I agree with you that Windows is a bit on the pricey side and that they do seem to have some sort of superiority complex about them when they came out with XP it was actually a nice OS. it worked; and that is what most computer user want. Now in terms of Vista, they could have waited to release. they had a lot of neat features in some of the beta versions when it was still under the code name Longhorn, but they were cut out at the last minute. I also really feel that 6 different versions of the OS is going a little far; I can handle having the two that XP had (Home and Pro). the only difference between the Home and Pro of XP was the fact that Pro had a few more Data protection protocols in it that helped when it came to business networking. Vista, on the other hand, comes in 6 different versions where the only difference are the amount of 'New' features they put in.
Companies like Apple and all the Linux Distribution companies have the right idea, in my opinion. they only offer two versions of the OS; Server and Home/ Business. How much simpler can you get. one OS that works great for both Home & Office and another that works great as a server.
Microsoft Office has been the industry standard of Office Suites for a very long time, this is mainly due to the simplicity of the programs and the ease of use. When Microsoft introduced Office 2007 they took the route of the documents created to a whole new level. they began to use XML within the documents from everything from Excel spreadsheets to Access databases to Word Documents. Office 2003 and before didn't use XML (with the exception being InfoPath). OpenOffice.org has not quite added the use of XML to their Office suite, however for the price and the wide range of people still using Office 2003 and earlier versions, OpenOffice.Org is still the best Office suite for price and functionality. (Note: If you do use MS Office 2003 there is a plug-in from MS that will allow Office 03 to read and write Office 2007 documents)
Just like windows has done for years with it's Office Suites it comes an a few versions. however the difference between the version of Office is not the same as how they differentiate the OS versions. Office versions differ by What programs are in the Bundle. In the Student and Teacher version, you get the basics that most everyday Students use. (Word, Excel, Powerpoint, and OneNote) The Standard is the basic suite for most home owners that aren't usually going to use their Home computer for anything other than the occasional letter to family members or keeping track of finances using Excel. The Business version contains most of the programs that a small business would use to be in contact with clients, partners, etc.. and the Ultimate version just contains the best of every Office product made by Microsoft.
In my opinion the best route to go whether you're on a tight budget or not is OpenOffice.org (NeoOffice for people on Mac). It can handle just about any Office file type you throw at it, except MS Office 07 of course. but If you must go with a version I urge you to do you're homework and find the suite that suits your needs.
If you happen to be on an Mac I should mention a little about the different options there. Possibly the best free suite out there is NeoOffice. NeoOffice is based off o OpenOffice.Org so it's basically the same thing, just geared for the Macintosh system.
However since you cannot get MS Office 2003/2007 you will have to go for either the Mac versions 2004/2008 Or you can go with Apple iWork.
MS Office 2004 came in 2 versions: Student & Teacher and Standard, while MS Office 2008 comes in three versions: Home and Student, Standard, and Special Media Edition. The New Special Media Edition is basically the standard edition with extra support and it comes with MS Expressions Media, which is Microsoft's take on a media library organizer (I thought that's what iLife was for?). Now I don;t have any version of MS Office for Mac so I can;t sa much except what I understand from the website, Now iWork is a little different. I've been using the trial version and have actually been pretty pleased with iWork 08. For a paid Office suite I'd hazard to say that this is worth the money. Comparably iWork is only $79USD and MS Office 08 is $149(student) $399 (standard) $499 (Media Edition) so I'd pick iWork 08 over MS Office 08 any day, but since I'm tight on $$ right now I'm sticking with NeoOffice.
Edit: I just realized that NeoOffice Can in fact save to the DocX format of MS Office 07 (i've included a picture of all the formats that NeoOffice can save to)