Pages 1 and 2 were both too focused on being word processing/page layout hybrid programs, and ultimately failed at both. I tried very hard to like Pages because it "fit in" with the system, but ultimately had to stick with Word and InDesign. Version 3 has pushed me over the edge, and (for now - we'll see what happens when Office '08 rolls around) has replaced Word for me.
The major things that people I know seemed to complain about (re: Pages as word processor) that have been addressed in Pages 3 are grammar checking (still not as elegant as Word - very few 'solutions' show up in the contextual menu, rather you have to go to the separate grammar checker dialog box... but the 'green underlining' is still there as you type); change tracking (compatible with Word docs, thankfully, and works well until you have more changes/comments than will fit on a page, and you try to print them... the ones that don't fit on the page ultimately get kicked off the island); live word count based on selection (no complaints here); and a normal formatting bar (which works well, except that if you have an 8.5×11" at 100% zoom, you lose some things on the right, which get replaced by an ellipsis. I wish this ellipsis were clickable to get at those missing things - namely line spacing, but everything here is accessible in the formatting palette anyway).
So I do have some quibbles with Pages, but the reality is that it's prettier than Word, and it runs a lot smoother than Word, and it's finally creeping up to the power of Word. Also, I've not yet experienced any slowdowns on a single 1.8 G5 or on my bottom-line MacBook.
As far as page-layout goes, I don't think I'll ever be able to trash InDesign for anything real, but for doing simple invoices, &c., Pages can hold its own. In my opinion, it's primarily a word processor now (as I had hoped it would be) with some nice page layout options thrown in. One thing I'd fix? Make it so I can customize hotkeys for styles... Not just function keys!
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