
Download =/= upload
This sounds perfectly dreadful for all the reasons you say... if it's true. As commentators on the BetaNews page observe, the announcement is really ambiguous. It say you won't be able to "download Google Docs in Office 1997-2003 format (.doc, .xls, .ppt)". If "download" means just that - downloading a file held in Google Docs/Drive to your PC, in a format of your choice - then all this change entails is restricting the choice of download format.
The announcement says nothing at all about *opening* (i.e. uploading) files in Office 1997-2003 formats. It may be implicit that this won't work, or it may be quite the opposite. It's a perfectly good reading of the announcement to assume that we'll still happily be able to upload & open older Office files in Google Apps after Monday, just not export from Docs into those formats. But it is a bit unclear!