Sean, yes you can edit text offline, I guess you might be able to drop images and media in as well but I've had severe issues with choppy connections and edits getting lost. On the other hand I'm just trying now while turning my wireless off and it does seem to work much better than it did, so clearly a lot of work going on behind the scenes. Obviously a lot of the other online functionality is lost and I haven't tested what happens with conflicting edits.

I agree with what you're saying about the interface to a certain extent but I think getting that balance right is hard. As far as I know this is the earliest state Google have ever released anthing in and the reasons for that were clearly to get the developers interested and biting. But I agree that the main inroads, particularly for research, may be where people write specialist polished clients for specific tasks. So use the full functionality in the background to do specific things but hide the complexities from the user by giving them a clean and simple interface.