Having been playing with an old PPC imac working in a similar mode - slow, low on memory and disk but works well enough as a web terminal to google docs, zoho and gmail, plus abiword for local document creation. It's all I need and use 99% of the time. And since I replaced the window manager with xfce it's been fine - in fact it's been surprising how useful it is.
Now such a stripped down environment is getting damned close to a thin client - not much locally, but a lot of infrastructure behind. After all if you can do it in a browser you can do it on anything, which means what is effectively a thin client for the web2.0 web. Yet as we know because the reponsiveness of remote services can vary as a function of load, it's good to provide a local wordprocessor/editor to provide that good close coupled response that even AJAX based solutions don't give all the time and synchronous editors like htmlarea or Xinha definitely don't give.
Providing cloud access plus local capability as a backup for when the internet is flaky slow or just plain gone away is a good trick. Just as I sometimes write my posts using kwrite running locally on my machine and cut and paste my submission into the blog editor, exactly the same way that 15 or so years ago I used to sit at home with my Mac Classic with its 9" b+w screen and write reports using microemacs and then cut and paste them into a terminal window running a VMS edit/edt session on the VAX8650 at work.
Not because one was more sophisticated than the other but because one was more responsive than the other ...