Richard is complaining about restrictions Microsoft places on people modifying the format. To him if you aren't full fledged GPL not only are you not open source, you are the enemy. Microsoft isn't a open source company, but its not an anti-open source company either. The release of XML file formats serves several purposes, the foremost is that the format is more efficient, flexible, and portable that previous formats. It is a secondary benefit that it is easier to work with as a third party (or open source) developer. Of course Microsoft isn't aiming to be GPL compatible, and is going to restrict modifications. Microsoft wants third party software to be able to open and save in office format, it doesn't want people taking the Microsoft technology, adding its own extensions, and releasing it (who wants to open an MS Office file in OpenOffice and then save it and have the results no longer be compatible with MS Office?).

Stallman is missing the point because of his open source dogmatism. Stallman wouldn’t know that the Office format is inherently a container format (it's actually a zip file), because he probably just read the license without reading the specification. If an open source developer wants to add something to the format, they can do so by simply dropping some extra files into the container. As long as you don't modify the Schema or take away files you won't be modifying the format and you won't be violating the license.

As far as enforceability goes, it is enforceable to a certain extent. Sun stopped Microsoft from making its own extensions to the Java VM when it licensed it to them, and Microsoft could do the same if a big enough project (only one comes to mind, Open Office) were to violate their license.

So, is the license technically incompatible with the GPL? Yes, but only a small part. Does this make any difference? No, you can still add stuff, you just can’t break compatibility. Are violations enforceable? Yes, but I doubt Microsoft would waste its time.