The latest version of AbiWord supports BiDi (Hebrew and potentially Arabic) text editing!
Unfortunately, Word docs opened up with it look weird (neutral character get shoved to the start of the line), and it doesn’t seem to be easy to work in.
Good start, though. Looks like the open source Hebrew word processor scene is heating up, with both this ASbiword development and with the Israeli Finance Ministry’s announced support for an IBM intiative to add Hebrew capabilities to Openoffice.