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I know I date myself by making the following observation. But it occurs to me that the (cough) 'younger generation' of technology users, by and large, have absolutely no clue what it's like to switch from one word processor to another, since during the entirety of their lifetime experience with computers, Microsoft Word has been the universal standard. (Microsoft's recent switch from the classic Word UI to the new, Vista-inspired Word 2007 UI has given some young users a taste of the experience. But Word 2007 is still Word, and if you absolutely insist, you can backslide to a classic menu view.) So let me clue y'all in: switching word processors is more painful than you would believe. Word processing is a core application with a deep feature-set and a complex UI. And experienced users get that UI in their bones. Back in the real old days, that meant memorizing reams of CTRL-key combinations, formatting tags, etc. Today, it means learning the significance and location of dozens of menu items and control-bar icons. So when you switch, your productivity hits a wall. You need to consult unfamiliar documentation or perform frustrating experiments over the simplest functions. It hurts. And the result (short-term) is blind hatred of the new system -- usually followed by Deal-Making, Despair and Acceptance in Kubler-Rossian fashion. Imagine now how it feels to switch -- not word processors, but world processors. Over the past couple years, I've spent a great deal of time in Second Life, building, scripting, running events. And now, suddenly ... Lively. A totally different scope on the same vision. Is it therefore any wonder that my first, deep gut reaction to Lively (day before yesterday) was an amalgam of scorn, contempt, mockery and dull resentment? This feeling was not enhanced by hanging around, last night, with an all-SL crew, in a Lively room set up by the brilliant Pathfinder Linden. On the upside, it was fun hearing people's responses -- and this was a bright, fully-clued-in crowd of SL and VW natives, with plenty of insight to share. On the downside (actually not sure it's a downside, exactly, but it left me feeling a little blue), Pathfinder was testing Lively media by veejaying a playlist of SL's best YouTube content, so we got to see/hear several repeats of the brilliant 2006 vid of Robby Dingo building Suzanne Vega's guitar, and his later vid, documenting creation of the Van Gogh 'Starry Night' sim -- two of the best and most moving pieces of SL-sourced machinema ever made. I found myself contemplating both the power of Second Life to inspire acts of radical creativity and beauty, and the richness of its creative culture, and wondering simultaneously if Lively could ever measure up, and whether its manifestation was, in a sense, sounding the trump of doom for SL's vision. After some meditation, I no longer believe that. I think that Lively poses no direct threat to SL, and may never compete, on an essential level, with SL, OpenSim, or conceptual progeny in SL's line. Meanwhile, of course, the point is moot: Lively is void both of creative tools and deep culture -- it has all the charm of an empty presswood closet from IKEA, newly unboxed and assembled in the corner of your divorced-man apartment (to paraphrase Jonathan Coulton). Whether valuable culture with emerge from the medium is an open question. But right now, I'm betting it will. This morning, I blew a couple early hours shell-shoping and furniture moving in Lively, and worked out most of the details for a technology harness to support multimedia events in the Lively environment and broadcast them to the web. And so far, things are working. There are lots of little bugs, but none are fundamental. The UI for moving objects around and configuring them is actually pretty good. And it's greatly liberating to work with a system that's embedded in a web page, letting me deliver a rich media/multi-application experience (e.g., Lively, plus audio stream, plus video stream, plus AJAX-driven powerpoint slides, plus multilocation chat) from within the same DOM construct. When I get authorization to proceed as a developer, we'll see how content creation and scripting work, and what the system can really do -- but so far, I'm sanguine. There's a there there. I know it's shallow, but one of the things that's making me particularly sanguine, at the moment, is seeing Lively expanded to full-screen on a really good display. I'll bet I'm not the only person who suffered from this mental block -- but for some reason, Lively's webbiness ... the fact that Lively rooms embed in web pages in a 460 x 400 iframe, and pop out into stand-alone windows sized (logically enough) to fit comfortably on a minimal display (e.g., 800 x 600) made me (inchoately) assume the system couldn't drive big screens. Not true -- hit the fullsize control on the popped-out Lively client and it happily expands to give you a crystal-clear, fullscreen view. Which in turn, solves another problem people were complaining about: the tendency of dialogs in Lively's "fly in from the right-hand-side" control interface to obscure most of the active screen. This is a problem when viewing chat in 'Chat History' mode, and a severe issue when trying to move stuff from inventory into a room and arrange it. But the problem is just an artifact of the way Lively's pop-out window is sized (800 x 600). Expand the window to fullscreen on a bigger display, and you're golden. So the plan, right now, is to test out this new Lively space (see below) with "Second Life Looks at Lively" -- a multimedia whoop-de-doo of media titans on Saturday night at 8:00 PM EST (5 PM SLT). We'll have Mitch Wagner (InformationWeek), Eric Reuters (Reuters), Rhonda Lowry (Turner Broadcasting), and a few other journos and thinkers join me in Lively, wherefrom we'll broadcast into Rissa's World2Worlds sim on audio and stream audio + video to the web through my new Lively Immersive Technology Harness - Experimental (aka. LITHE). It'll be fun to get everybody's impressions after a couple days of stumbling around in the environment. 
World2Worlds' Lively Office. That bear in the Aladdin suit is quite a speaker. 
Rissa Maidstone, CEO World2Worlds, in Lively. Always chic.
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I solved the problem by whining, shutting it down, and using Google Docs, which parallels the old interface well enough.
I've had some of the same response to using Lively: it won't enable my SL habits, and that leaves me facing creative paralysis.
But the issue with the Lively interface goes beyond the problem of novelty, I think. The medium is the message, and the message sent by the Lively interface is one I dislike.
I think the interface message is one of willful ignorance of its users. Sure, it's avatarized chat and not a digital world, but it's not avatarized chat done particularly well - which, from Google, I find shocking.
Any of the people at the World2Worlds Lively event could have improved the product dramatically after a few minutes of alpha use. The only message I can hear from such a clumsy interface is, Google didn't listen.
That leaves me inclined to do the same...
I agree with you, it's clear that none of the thinking that makes Google Chat so intriguingly functional (or chat embedded in Gmail, for that matter) has made it into Lively. But I think they'll pull down (or option out) the word-balloons pretty quick. SL and WoW do word-balloons too, no? Nobody uses them, of course.