The MacBU is jointly sited in Mountain View (in the valley) and Redmond (at the Death Star) so that argument's a tie. Apparently like Google, they consider it a good thing to keep their teams all over the place. I suspect shirking from managers has a role in this in reality!
Anyway, I actually feel for the Mac devs at MS. Their apps used to be pretty good, and still are of course the lingua franca for file exchange. But developing in Carbon must suck and they really must reconsider that after this version. Cocoa in Xcode is where its at and where it's all going to be. Considering the farce surrounding their dumping visual basic in Mac Office (which really screws a bunch of people as talked about in comments here
) and the recent antics going on with the .docx etc. converter for Office 2007 files, you'd think they realise that their long term struggle is only ever going to get worse if they keep going where they have been.
Office 2007 is an advance on the Windows side, but what I'm seeing of Word 2008 at least does not give me much hope. I do want to give the MacBU the benefit of the doubt though, because having tried Pages with some real life work, my faith in iWork is far from complete. Apple's typical secrecy around its development really doesn't help. And for all you may or may not think about MS's style of UI and so forth, their apps are going to be used professionally in a way that Apple's iWork is not for a few years to come.
Nice ideas about a file database / iTunes inspired office app by the way. A code shop out there could be well advised to take that maxim and create their own up to date, robust, and responsively developed productivity app. I know a few prospective buyers including myself. For such an old genre, there's a world still left for improvement!