All it is is a fancy site integrated RSS reader, not what AJAX is for.

Yes, you CAN use AJAX for this purpose, but I think you are looking at it from the coding perspective and not the network/system utilization point of view. This isn't much different than the vbshout hack, which causes a pretty big hit on your system resources.

IMO, there are other tools to do this function.

Tell that to the people who get booted by their host because they naively install this kind of crap.

Tell that to the people who find that httprequest functions have been disabled because of hosts that are sick of dealing with these issues.

Just becuase dynamite can be used to kill people as well as move mountains doesn't make killing people a good idea.

basically a cheap copy of Digg.com's Digg Spy;)

Without getting into why comparing code to killing people is a little silly.. ;)

Something like that, showing (for example) the last 5 posts embedded in a CMPS block would be pretty freakin' sleek.

Server issues aside, i really like how topics update on that site.

The Diggspy way of refreshing is a pretty attractive one - and would function pretty well on smaller forums that don't already hammer their host servers.

Their code is downloadable (digg-spy), I've been picking at it trying to get it to work with vB, but it'll be a while until I have anything solid.

Depends... It's not as heavy as someone hitting "Find New Posts" every 5 seconds, or watching the who's online page reload every 5 seconds.

Still, might be best used as a staff only page or even a paid members only page for those with stretched servers.

Now if someone where to make a mod to plop this into the header of every page that gets displayed, that would definately crash and burn :)

I think the absolute best application of this would be on a CMPS page, in the Recent Posts module.
Having 1 module update while others stay static would be much less strain on the server then having users doing a manual refresh every 30 seconds or so. If you had the ability to change the interval at which it polls, you could customize it to the needs of all types of websites.