I think that this application of Mathematica is critical. This is the kind of thing that has been promised for Mathematica since almost version 1. I have used Mathematica in this way when I was working to communicate with my work colleagues, but there were significant tissues, only some of which have been addressed in recent releases.
First off, the style sheet mechanism is entirely inadequate to the task. The user should be able to embed fonts, as you can with PDF documents. There needs to be a way to globally replace, for example, Arial with something else, and not have to hint around all the variants on the styles to find them.
Having two column documents, or sections, is also useful. This functionality can be implemented with Grid[], but it is not the same as a word processor. Even for documents which are to be viewed on-screen, having two columns is a useful option.
The CDF player (or its replacement) needs to be more flexible, and allow the end user (who does not have Mathematica) to do more things. In my former company, there was an issue with installing the reader, but that is not a problem with Wolfram technology, but one with IT myopia. Still, something might be done.
I would like to see a website, similar to the Demonstrations project, where users could submit documents to share with others. The restrictions for a Demonstration size, restrictions on text, etc. limits what can be done. I have done some work that is not worth publishing formally, but which, I hope, would be interesting to other people, and not just Mathematica users.
I'm pretty sure that embedding fonts in a notebook document is possible. The style sheets need a good revision, with the goal of delivering an excellent experience, for both producers and consumers, of documents that will (only) be accessed on screen. With these changes, I thnk that Mathematica is up to the task.
Beyond that, having a site to share documents, similar to the Demonstrations Project website, will provide an incentive to make the documents, and to provide a showcase of good design for other users. I know that something like this has been discussed at previous Wolfram Technology Conferences, so it should be possible for Wolfram Research to do this as well.