I've been using this feature for years, and it's a good one---but two things are lacking.

You said, '...PowerPoint will only use text formatted with the default heading styles.' That's not completely correct. It's the outline level in the syles that matters. Any style that uses an outline level of 1 makes a new slide, outline level 2 a bullet, etc.

Second be sure to change the file type in the Open dialogue box in Word to 'all outline files' or PowerPoint won't see the Word doc