Linux is fine for everything except for:
1. software that "breaks the law" (patents - mp3, dmca - dvd css)
2. secret proprietary formats (ms word docs, wmv, macromedia director)
3. applications that rely on windows as a software platform (pretty much every computer game sold for personal computers, photoshop, cubase)
4. hardware manufacturers that don't release the relevant info needed for drivers (nvidia, ati)
5. any software that isn't located within the package management repositories.