OpenOffice is not written as a commercial product. The fact that it is so good is a tribute to the people who have contributed their time and other resources, and the companies who believe that they can make other sales as a result of being apparently altruistic (Old Sun comes to mind). They are entitled to give their effort away if they choose.
But just giving away software is not a business model, which makes it an unfair comparison. In this respect, I do actually agree with Microsoft. They have invested effort producing the software, they are entitled to get reward for their effort if people want to use it. It would be their right to give it away, but it is not a duty for them to allow anybody to use it. It is more an argument of value and worth.
Now I'm not saying that people should stop using OpenOffice, but just that they be aware that free at the point of use does not mean free to produce. I also disagree with the prices that they charge, but I agree about their right to charge something.
You could almost turn the tables, and claim that Microsoft's commercial product is being undermined by the supply of a free alternative. This is very similar to the argument that Mozilla used when arguing against Microsoft giving away Internet Explorer (OK, OO is not an integral part of any OS, but that was not what was initially argued).