Works great for us.
From the users' perspective, pretty much everything works just as if we had the server in-house. Forwarding and other rules are uploaded to our hosted Exchange server using the Outlook client. So far I've just created distribution lists in our host's control panel for convenience, but it should also be possible to do the same thing in Outlook. We have had no issues delegating contact editing and ownership privileges to other users. Our host (Apptix) gives us a unified control panel that allows us to manage our EAS/BES devices - we can provision, activate, wipe, etc. Blackberries, Treos, and Windows Mobile phones from right within the control panel. Advanced mail filtering is done using a separate MxLogic panel that allows us to blacklist/whitelist domains etc etc...
The main drawback is the recurring per-user costs, but they are trivial when compared with the equipment, licensing and labor costs that would be involved if we had to do all of this in-house. I would imagine that the cost advantage would decrease for larger companies, as it is easier to justify a significant in-house investment if those costs are spread out over many users. For us though, hosting Exchange is a perfect fit.
Good luck!