Maybe I am misinformed, but I thought it worked just fine offline. I don't see what the problem would be.

My guess is that it will first take off in blog posts. This is a place where people don't have high interface standards (unlike collaborative editing), where not too many features are needed (the versioning feature is a major problem right now) and where it can easily spread without requiring commitments (unlike changing your IM client or email).

The interface is a major problem, though. Developers look at this and say, wow, the features are really powerful. Users look at it and can't see past the lack of polish. You might say that these users are short-sighted, but I think they might be right. Getting the interface perfect requires a *lot* of work, which few developers appreciate. There's a reason iPhone apps look great, while Blackberry apps look, have always looked, and probably always will look terrible. Really, I would have been happier if the Wave demo had started with a highly polished application for a limited functionality, say blog comments. Then they could have turned to describe all the other cool features.