Basic advantages – you can view your e-mail in Word. You can compose your e-mail in Word and format it automatically. You can mark changes in your e-mail, and you can use e-mail templates in Word that are purpose-specific. The disadvantage of Word is running two apps at the same time when one will suffice. A lot of people use Word as their e-mail editor because they were using Word long before they had e-mail and they are comfortable with it…
Formatting is more flexible in Word, and also works much better. Word’s HTML editing is superior to Outlook’s internal editor. In Word, you can drag and drop inline graphics without switching to “Outlook Rich Text” format that can only be properly read by recipients who also have Outlook.
Computers with limited RAM might not want the extra overhead of starting Word when composing email.
Word 97 and Outlook 98 worked poorly together in my opinion. Word would frequently crash while editing email. Word 2000 and Outlook 2000 work far better together. Word is now my preferred email editor.