MS Word 5.0 runs on everything up to Mac Classic on a G5. You may have to reinstall it though, since it may be expecting to see an FPU, seeing that yours is a transfer from an FPU equipped Quadra. Excel 4, and PowerPoint 3 shuld be good matches.

I'm sorry but I can't find anything good to say about Office 4.2.x

Try WordPerfect 3.5e for Mac. It's been freeware'd sometime ago. IMHO, it's still the best wordprocessor for Mac System 7.x - 9.x

As for OS 8.1 on the 540c, I'd say go back down to Mac OS 7.1.2P, or 7.1.1 (that system's original OS).

Appleworks runs great on that machine. So will IE 4.01, and BBEdit Lite.