iWork '05 has no spreadsheet, so I suppose it makes some sense that it wouldn't be able to open spreadsheets. This is one of the reasons I still think it's not a suitable replacement for AppleWorks yet. Fortunately, it is rumored that a spreadsheet is coming. I may look into getting iWork then.
The fact that it wouldn't be able to work AW5 docs, however, is somewhat disturbing. Try opening the document in AW6, saving it in that format, and then reopening it in Pages.
It would be nice if Apple opened the older AppleWorks formats, so that people could write converters.