What is this standard actually for?
Quite simple, (NB these views are entirely my own, based on Microsoft's history, and what I have read in the media).
A lot of governments (or parts there of) being tired of vendor lockin (and the accompanying bill), or feeling the push to standardise, have decreed that only open standards are to be used in the public sector.
Microsoft .doc and .docx were not at the time at open standards (though I really doubt they are now, even though docx are ISO approved), and therefore a huge push existed for ousting Microsoft from the public sectors - possibly one of their largest market segment. If they loose the public sector, the education sector would follow, removing the Indoctrination of the young into believe that Word is the Only office application, and windows the only operating system, that can do what they need - which could lead to the end of their reign as dominant office application platform, and perhaps threatening their desktop monopoly.
Thus to twart the effort to move public sectors from paying billions to Microsoft in license fees, to using the free Open Office application (or open source in general), Microsoft needed to get a file format approved as an open standard, or they would need to directly support a competitor format - ODF..
(Incidentally I have yet to find a single task that Microsoft word can do, which open office cannot, I have however found few that open office can, which MS word could not).
However, supporting the competitor format would directly ease the change over from Microsoft office to Open Office, thus removing a lot of lockin barriers which currently are in place to prevent such a change over, it would therefore be unwise for Microsoft to directly support this format.
Introducing their whale of a standard, which is so complex, and huge that it is unlikely that it will ever be fully implemented in competing products (last revision is reported to be more than 9000 pages). This means it is not likely anyone will be 100% compliant to the standard, where after Microsoft would not need to comply fully to the standard either, and therefore they can warp the standard sufficiently, preventing competitors from being 100% compatible with Microsoft Word, where Microsoft then can claim that the competitors are not standards compliant, because they have not understood the standard correctly - then arguing for open standards, or open source suddenly becomes more difficult because MS owns the standard, which is defined to be open due to the ISO stamp.
So the whole process makes perfect sense from the point of view of maintaining their market dominance and their monopoly with in word processing (though, the correct term is ogliopol, which I don't know how to spell).
Similar things have been done with kerberos which is used in some microsoft applications, they claimed that they're using a standard, however it became a standard + some proprietory additions, which made it incompatible with all other implementations, likewise with the web standards and so forth, so why should I believe that they would follow their own official standard, without certain modifications to maintain a lock in (or rather lock out of competitors) - their history is against them.