I don't often sing the praises of the boys up in Redmond, but I recently installed Office:mac 2004 (only because I could get it through work and my personal copy of Word from Office v.X had mysteriously ceased functioning—probably something to do with corrupted font files, but I didn't have time to diagnose and repair the problem), and the way Word now handles Track Changes and Comments is simply beautiful. (Larger screen shot.)

And while I'm mentioning it, I've always found the Track Changes and Comments features of Word to be among the most reliable ways to impress people at introductory how-do-I-use-technology-in-the-classroom? workshops. They are great for this purpose because they really do serve a useful pedagogical function, especially in composition courses (they are good for peer-editing, for instructor comments, and also for becoming more aware of the self-editing process), and they are part of a program that everyone already uses so there's no real learning curve. And of course, one gets the satisfaction of hearing, “Wow! I never knew that was in there”.