Word Processors are stupid and inefficient, but the problems have nothing to do with including formatting options. For a one page business document, MS Word is just perfect. You need to be able to create the right formatting (bolds, headers, bullets, numbered lists) in order to get your point across at a skim.

For long documents, there is a big opening in the market.

An ideal word processor would have powerful features for organizational structure. This means drag and drop organization of chapters, subsections, and the ability to add meta-data to them—main characters, affected departments, whatever is appropriate. Color codes attached the the metadata would allow at-a-glance determinations of length, flow, etc. It would also be able to create visualizations of use of names and terms, and assess reading difficulty. The table of contents of your document should be a map that helps shape the work.

It would also need a context-sensitive thesaurus, powerful grammar tools, and revision control in the tradition of programming revision control. I should be able to cut a chapter and effortlessly bring it back in later in the manuscript two revisions later.

There are a few programs that attempt the basics of this for Mac, and nothing that I can find for Windows. Not including typesetting is just the beginning, and only necessary because it gets in the way of the rest.