Rands, there are many ways to do it (that is half the battle, everyone chooses their own... and throwing the weight of Google and Sun behind one might help - if they make a good choice).

37S didn't do it, because their writeboard isn't about formatting, rather editing. Gmail does pretty much everything a basic rich editor needs to do. So smash together GMail's rich editing with Writeboards versioning, and you have a simple, light-weight, web-based document editor. Now get some proper print styles in there (A List Apart just released an excellent article on more advanced forms of this), and it's done. Imagine that product (working properly), and at low price point where it isn't worth buying Office for your PC. Should be MS be scared of that?

I definitely have to agree about the hoopla, and that this will not help either company (unless Google got a discount on Sun server for the PR effect)