Functionally this is awesome - we use etherpad a lot for collaborative text editing but having something a bit more structured like this could be very useful. The experience of entering a rewrite and having it broken down into several distinct edits is great, and there's lots of thoughtful touches in the UI (like starting off as anonymous and "claiming" vs. having to create an account up front).

Visually there's a lot of work to do - if you can get even a day or two of a great web designer's time it will be very worthwhile. For example, although you describe the two icons as "pen" vs. "pencil" they just look red and yellow to me - and then they both create (different kinds of) red text. Your logo needs to be antialiased.

On the pricing page, it's clear that there's lots missing from the free editing, but it's not clear what the free edition actually does provide. It seems like you can still use it to create private documents, but that's not obvious from the description. You might want to have some more rows on that comparison table that have checkmarks all the way across.

One group I can imagine loving this is lawyers, although they'll hate that it's hosted. You'd probably need to add more features but it would be interesting (if you haven't already) to talk to some and see if there's a custom version you could build with workflow targeted to contracts.