Office Live Workspaces

I was curious about Microsoft's Office Live Workspaces when I heard it had been opened up to the public in beta form. Worthy of noting are the prize giveaways associated with registering and using the service. I signed up.

It looks good and usable for many things (including the creation of quick notes and predefined task-based documents), but it is seemingly missing a HUGE feature curently available with Google Documents. Why can't I create a blank Word document or Excel Spreadsheet in Microsoft's Office Live? Why does this have to be an "extension" of Office and not a web-enabled Office? I think the answer is obvious...