OpenOffice is okay. The Apple shop in London was pushing educational copies of Microsoft Office when I was in there a few months ago, saying that as "almost any qualified for one then you might as well just buy that". This wasn't an individual salesperson, this was in one of their theatre demos. It's about a £120 I think.
Which bits of Office do you actually use? "Pages" is much nicer for doing some types of word processing.
An old iMac might be a bit slow, so don't judge on that basis. And while the new G5 ones are great, don't underestimate the Mac Mini (with some extra memory perhaps) if you've got a decent screen already. It's so small that with luck Mrs B won't even notice you've bought it.