depends on the application. when we first introduced vista beta 1 on our systems at work nothing worked at all. When we introduced beta 2 on a test system at work, it worked better but nothing was compatible. Drivers failed, applications broke, network support fell through the floor and down into a deep abyss where the naked eye could not see it.
Then we got our hands on the final release via our MSDN subscription. I have vista business on my desktop at work. I have the beta (yeah beta) software/drivers for everything I need it to work with at my job. For the most part the newer software works. Not very smoothly at times but it works. The legacy software is a whole other story. After many frustrations I made a virtual machine of windows xp (since trying to install it on a seperate partition was a HUGE pain and the vista installer took a decade, I made a VM instead) to run the legacy apps I needed for work. Now, this is a work machine, so no gaming is done on it.
My work desktop specs are:
HP 5150 dx business class desktop
2gig RAM
AMD 64 3400+
150gig SATA2 HD
Radeon x600 PCI express video card 128MB
Vista runs like crap compared to XP. So, I went back to Linux and am running that and vista on my machine now. I pretty much never boot into vista unless i want to tinker with it these days.
In my experience legacy applications for a lot of things won't work. If you are using any kind of huge distributed app, like photoshop it should probably work. Obviously MS office should work as well. I believe the MS rep told me Office 2000 and above will run on vista but nothing lower. That is to be expected I think.
I would recommend you download the vista compatibility checker from MS's website and run it or go through their knowledge base. A lot of times if an application is not compatible a patch or update will make it compatible. Now whether or not it runs stable is another question.