I've worked with Word documents in SVN. With TortoiseSVN, you can easily diff Word documents (between working copy and repository, or between two repository revisions). It's really slick and definitely recommended.
The other thing to do if you're using Word documents in SVN is to add the svn:needs-lock property to the Word documents. This will prevent two people from trying to edit the same document at the same time, since unfortunately there's no good way to merge Word documents.
With the above two things, handling revision controlled Word documents is at least tolerable. It certainly beats the alternative of using a shared folder and track-changes.
