Don't be surprised to hear me say I love OneNote 2007. I was never a big fan of OneNote 2003 because of the fact that ink felt like an afterthought. But I am really digging 2007. Great improvements and it looks and feels alot more polished.
I never really saw TEO and OneNote as competitors although sometimes the way you see it isn't the way things really are. You see, people have a finite amount of money they're willing to spend on their Tablet PC and accessories and they have a finite number of uses for it. Some people may find OneNote to be a suitable organizer for them and some may insist on keeping their stuff in Outlook. In this way, they are competitors.
However, I see it another way. I use TEO and Outlook for things like calendar, tasks, contacts, etc which is what it was designed for. I take basic notes attached to the Outlook item itself because it's easier to find this way and one less step. I also like more structured notes when I'm logging a phone call or meeting. TEO and Outlook Journal give me that.
But where OneNote really shines is when I use it as a bucket for information scraps that could come from anywhere. I've been reading David Allen's Getting Things Done and he emphasizes getting your obligations out of your head and into a system. OneNote works very well for that and new in 2007, it makes it much easier to go from an unstructured note on a page to a tracked Outlook task. Another utility that is indispensible when using OneNote is SnagIt because both the virtual printer and the Send To OneNote IE plugin produce horrible looking pages, IMHO. But SnagIt is always at the top of just about every software workflow I have.
For longer-term projects, Outlook falls apart. But OneNote lets me keep a section called Jobs for example where I can throw any interesting job opportunities (yeah, more on that later). I have a section called Houses where I am storing information that I come across related to buying a new house, getting a mortgage, property taxes in North Carolina, etc. This would all be very difficult to keep organized in Outlook because it is so unstructured. If I have a specific “to-do“, that gets tracked in Outlook, not OneNote. But OneNote is great for those “maybe somedays“ or brainstorms.
So I definitely see TEO and OneNote as complementary. TEO will never be as full featured for general purpose note-taking as OneNote, but OneNote will never be as structured and organized as Outlook.