Steve is right about the domain. Also, you cannot run Office without "installing" it. It isn't just a question of where the files physically reside, there are application registrations and other registry settings that need to be made on each workstations local registry for the application to work. On top of that, even with applications that can be installed to run from a server, you still need to purchase a separate license for each workstation that is going to run them unless you are running Windows Terminal Server (which is a completely different ballgame...).
If you are in a real company that plans on surviving more than a couple of years (and therefore will need to control it's information and processes) you put in a server, with a true domain and store ALL information on the server. The only reason to have hard disks in workstations is to speed up applications.
If you like chaos and enjoy having NO control over your business, you set up a pure peer to peer network and give your end users free reign to do whatever they think they need to to solve their current problems with no thought given to running a sustainable business in the future.
Jeff
I haven't lost my mind - I know it's backed up on tape somewhere ....