Writely isn't the end of word, or any of half a hundre other word processors and editors.
The thing that make word and its cohorts so popular is the responsiveness of the system and the guaranteed responsiveness of the system, because the application, the processor and the user display are closely coupled.
writely isn't a new concept - desktop.com offered a remote desktop app before they went under in the tech wreck, which did similar things.
Likewise in the days of time sharing systems when we ran word processors on them people didn't like it when they were heavily loadd as they didn't get predictable performance and the text tended to lag behind the typing.
That said, writely's an interesting idea, and good for collaborative working, especially when you have a colleague overseas or interstate and you're trying to put together a document super quick
Is Writely the End of Word?