Let me say first that I'm using a Lumia 920, so if your problems are directly caused by running on the M8, you'll see something different than I have. However, if it's not related to the hardware, maybe I can help.
The way you create a new document in the Office hub is to swipe over to the recent page, then tap the + at the bottom. That will bring up the list of blank documents and templates. It should allow you to create new documents on your phone or on any accessible OneDrive even without setting up Office 365. If that's not the case, then I'd say you have an issue you should report to MS. (And yes, I realize you've tried already. Too bad they didn't understand your issue, but maybe the additional info I'm giving you will help you communicate with them.)
It's been a while, but if I recall correctly all I gained by doing the Office 365 setup was that my email account was added to my phone automatically (rather than having to add it manually in my Accounts list), I gained access to my employer's OneDrive (in addition to my personal OneDrive which I had already activated), and I gained access to my employer's Sharepoint folders. These all showed up on the places page once I completed the setup. I think I tried redoing the setup once before I understood that that was everything, an attempt which gave me an error, although I don't know now which error it was. If you have your Office OneDrive showing under places and an entry for opened attachments under email, you may have everything you're going to get. If you don't, I'd agree that you have a reportable problem.
I hope this makes sense and is helpful. If not, please post screen shots of what you see in Office, as that will make it easier to help you.