The way Word does it is exactly what I'm looking for, except for the not being online thing so that multiple people can all comment on a single copy of the document. The problem with using Word, in my case, comes down to the way our group works. Our professor might assign eight cases that must be read and briefed (a formal structure that boils cases down into specific elements like, Statement of Facts, Procedural History, Issue, Holding, Doctrinal Reasoning, Policy Reasoning, etc.).
So the problem with Word is that we aren't on a single internal network. We have to email our work to each other. If I brief my two cases and email them to each of the three other members in my group, and each of them make comments and send them back, I am suddenly juggling four different copies each case, and they probably all share the same filename. Then I need to open them up individually and go through the comments, many of which are likely redundant, and decide which ones to incorporate into the "real" copy. It's kind of a nightmare.
So unless Word's track changes feature has capabilities that I'm not aware of (it very well may, I've hardly used it), I think it's just not very practical here.