I don't know if you've noticed, but we also give the option to write in Markdown. Citations work too, as long as you put them in Latex style, ie \cite{synparb}. Markdown is nearly powerful enough to write a full-featured article, and Latex is clearly overpowered. I like the idea of extending Markdown to give it everything one would need to write an article, without all of the excess.
I hope you try this out on your collaborators.
Markdown is a real pleasure to use. One of my favorite features is that it is easy on the eyes. I was never in love with the Latex syntax.
Out of curiosity, can I ask what field you are in?
For my last paper though, I was able to do it all with Google Docs, except the citations. I ended up just embedding citations like {author, 2013} and using either Papers or endnote to do the insertion.
However, I still had to submit the article in word format, so I really didn't gain anything and had to effectively reformat it 3 times. I think this has as much to do with Word/Endnote's de facto monopoly as anything. Since the journals require it, we work with it.
All of that said - I'd love to see something like this take off, but there would have to be some buy-in from the publishers.