I've used it - it works fine. Here's some observations:
1. I think I read that very large files (mp3's, audiobooks) cause the ipod to use the hard drive more often, which affects battery life. Now, I started using audible.com when the ipod 1.2 update came out; either way, I don't get as good a battery life, but I don't know who the culprit is (audible or 1.2).
2. Audio books in format 1 would chop off at the end of the book. Format 3 works perfectly.
3. If you lose power to your ipod (let the battery run out) you'll lose your place in the book. Since the ipod has a quick way to scroll through the book, it hasn't caused me much heartbreak. The real(something) mp3 player I used previously made me scroll forward at an incredibly slow pace, so dealing with it on the ipod is easier.
Now that I've had some experience with it, I like the service & the way it works on my ipod just fine. My experience with other players hasn't been as good, even though I've focused on the negative/gotcha's here.
-Chris