I've just used Writely a little and I have to say that Google Spreadsheets is much more advanced. Writely reminded me a lot about creating a rich-text editor. I did that some time ago, and while it was fairly easy to do, you have to deal with different types of editors for Internet Explorer and Mozilla, which have a lot of bugs - sometimes they work, sometimes they don't. Mozilla also implements restrictions for copy-paste, so you can't do that using the code.
You must remember a rich-text editor from your mail account or your blog posting form. Gmail has one, but I've never written a complex document in Gmail.
Writely is a rich-text editor that allows you to import HTML, OpenOffice and Word documents, and to export them as HTML, Word, OpenOffice and PDF. I couldn't test the import feature, but a fairly simple document is exported well in Word.
The problem with Writely is that it's very limiting. Writely doesn't know about pagination, headers, page borders, page orientation. If you insert an image, it's very difficult to align it. If you delete a table, there's no undo. The list of fonts is small, even if you have a lot of fonts on your computer. You can't define styles to make your document consistent. The list of keyboard shortcuts is limited by the conflict with browser's own shortcuts. Because Writely runs in the browser, you can't select non-contiguous text. Writely also disables the contextual menu of my browser and replace it with its own menu. It replaces Firefox's copy item with its copy, that doesn't work because of the security limitations. I also can't use the spell-checking facility from Firefox 2 or search text on the web by using the menu. Writely crashed Firefox twice, although I was just writing this simple text. There's no search facility, just a "replace all" feature that doesn't have an undo.
Writely does something very well: it stores your documents online so you can share them with your friends. It also allows collaboration, more people can edit the same document at once. Google Spreadsheets is better: you can chat with the people that work on the same document as you. Writely automatically saves the documents every minute so you don't have to use recovery features like in Word.
But Writely is just an advanced rich-text editor, while Word (or OpenOffice, AbiWord) is a word-processing application.
Related:
New invitations for Writely
Google Spreadsheets
Make diagrams online with Gliffy