I use the office options on my WP all the time. I however, do not do any power point, so I will just give a nod to those that do.
MS needs to improve this quickly. Their corporate software is their empire, and getting WP to be able to access this is only to their advantage. I love my Office interface, but yes it is limited. One Note rocks, but I find Word and Excel only fair.
iWork, however, is not that much of a better option. I have only had limited access to it, but I find it as limiting as any other mobile work option. It may be just that I haven't spent much time to access all of it's features, but really if you are doing any heavy lifting with an Apple product, it sure as crud is not with an iPhone. It is with a Mac or an iPad.
Office is the same way. Accessing it on the go to review your documents or presentations make sense, but there is still no way the vast majority of professionals are using a mobile phone to do work. It is still a laptop, with Tablets slowly catching up. Tablets are still a consumer based device, and PC's/Laptops sell as much in a quarter and a half as Tablets do all year long, iOS/Android/Win8 combined. This is completely due to the corporate world which will not move away from the most productove way to get work done until you drag them kicking and screaming. PCs still provide the best way to get work done, and smartphones are a compliment to that, not a replacement.
As for the "Phablet" argument, the first Samsung Note was released barely three years ago, and the explosion of these large screen smartphones was really just last year. Do you see professionals grabbing their 6" screen and holding up to their faces for their important phone calls yet? Nope, not quite. Again, these are consumer devices right now for multi-media uses and gamers. Tablets are just now making it into the boardrooms. The 1520 will be nowhere near them anytime soon.
My opinion: Office will adapt. I expect to see the merging of Windows RT/WP at some point, and then mobile versions of Office will be a ton more adaptable. But MS is not moving THAT fast yet. Part of the reason Ballmer stepped aside as CEO was to get younger blood in there with more urgency. MS will not cede anymore ground in the corporate world then they already have. Let's see where they are at the end of 2014.