The structured storage part isn’t the problem, because Word doesn’t actually use it much except when you use OLE (the seemingly builtin things that use OLE are images, the abominable Equation, and maybe WordArt). IIRC the Word 97 format is essentially the previous Word format (whatever it was called) changed to use UCS-2 throughout, packed into a single stream in OLE storage, plus a bit of frills such as \005SummaryInformation.

(This is to be compared with e.g. OOXML spreadsheets, which go as far as to store the sheets of cells and the strings inside those cells in two completely different entries of the ZIP container.)

Everything that a Word document is maps 1:1 to a relatively straightforward string-of-bytes RTF. (With, again, the exception of OLE, which is why WordPad can write stuff that it assigns a .DOC suffix but is in fact an RTF stuffed into structured storage.) In fact, there was a piece of Microsoft software called the WinWord Converter SDK (Q111716) that used RTF as an intermediate format and had a bunch of DLLs that could read and write other formats; a compatible set of DLLs shipped with Windows and supported WordPad, and a larger one shipped with Word proper and contained all of its foreign format support.

However, if you look at that perfectly innocent, easily parseable RTF, you’ll find that it is still a nightmare. Not only because Word generated horrible unoptimized RTFs and only used Unicode text if it couldn’t avoid it, but also exactly because it can represent everything that a Word document is, and that is an unfathomable amount of stuff to be able to represent, even for Word 97. (None of which the alleged RTF spec tells you how to render or lay out.)

My personal answer to the question “why can’t one replace Word?”, or rather “why are all replacements for Word either failures or not particularly better?” is that Word can do (and thus supporting its format requires you to implement) so much that being compatible with Word is effectively equivalent to just being Word. To be fair, OpenOffice Writer is a pretty decent Word and I do use it when I need one, but it’s very uninteresting as a contribution to the field of handling formatted text on computers.

OpenOffice Writer and LibreOffice Writer have their proper bugs of their own, to the point that it's very frustrating to work with a non-trivial document. Many of these include some aspects of formatting not being saved to file and not restored when re-loading the file. And this is saving to .odt and not .doc or .docx. The Calcs have many bugs too. I have reported some but have since given up. For serious work I return to Word.

The other alternatives are not better. A couple of weeks ago I needed to create a catalog of products that is just a few pages long. Calligra couldn't even show the image I added; there was bounding box which could be moved around but no images were shown. Abiword got glacially slow when adding a ~4MB image.

Once upon a time I worked for a company that did document viewer software (in the year and a half I was there it went through three names none of which I can remember). One of my first tasks was—no, seriously—debugging an issue where an animated gif in an Excel spreadsheet embedded in a Word document wasn't being animated.