Yep. When I have to write a paper, it's a no-win situation.
OOo usually lets me get the job done, but it's probably the most awkward thing I've ever had to use in my entire life. All its features are obfuscated and hidden away under a poorly designed menu system. And as you said, it's just incompatible enough with Word so that you can't easily work with others (though 2.0 is a HUGE improvement in this respect).
Abiword is my preferred squeeze when it comes to writing papers. It works very well for papers that aren't over 10 pages in length, and use only the styles Heading 1, Heading2, and Heading 3. Anything more complex than that, and Abi crashes and burns. It maybe opens 30% of the .doc files I have kicking around on my computer, and its feature set is anemic. Maybe given a lot more time and a lot more resources abi could grow to something really nice to use, but for now I'm stuck using it for short stories and lab writeups.
I'd love to be using TeX for all my word processing needs...it suits my work style. When I program, it's vim and nothing but vim where a lot of others prefer MS visual studio and Eclipse. Similarly, when I'm doing math processing it's Octave all the way...plain simple interface. A lot of people love the Mathcad and Matlab GUI version where you can often point and click your way to a solution, but it just doesn't feel right to me. I'd love to say the same thing for word processing. but unfortunately I'm no good at all with the tools. Things that take me literally 30 seconds in OOo/Abi have taken entire days bumbling around with LaTeX trying to figure out how to do it. Maybe some day I'll set aside some time to learn.