Software
The wisest thing to do is simply pick a word processor you like. I love all the editing tools Word has, the research features, and the fact that the latest version of Word lets me and an editor work on the same story at the same time, in real time. But I think WordPerfect is nearly as good in most ways, and better in some.
But Robert J. Sawyer, Roger MacBride Allen, Jeffrey A. Carver, Arthur C. Clarke, David Gerrold, Eric Kotani, Paul Levinson, George R. R. Martin, Vonda McIntyre, Jennifer Roberson, and a number of other pro writers still use WordStar for DOS. If my hands were still in good shape, I might still be using WordStar. For writing early drafts, it can't be beat.
I've met writers who still use Word 3.1, WordPerfect 5.1, and Works as their number one processor. I know several pro writers who use OpenOffice, and several who use StarOffice. Mac users have a number of word processors, and some swear by each of them. Name a word processor, and some writer is out there using it.
Fiction, as they say, is written with wetware, not software. As long as you like a word processor, and as long as it can save to Rich Text Format and/or to Word format, and as long as the program is stable, just go with what you like, what you need.
The latest version of Word saves me time on the final draft, and lets me work with most editors easier, but it's hardly necessary.
Most writers do use Word, and by a wide margin. But this is largely because Word is what they have available. WordPerfect is also popular, and very cheap, if you buy the Family Pack version.
But any word processor that lets you get the words down, and that doesn't crash constantly, is probably the one you should be using.