I *loved* having one of those cloth towel dispenser things where I worked. One of the local linen supply companies convinced my boss to try one for a week. It worked great! Two people could easily turn an unwilling coworker into a mummy. A roll had enough towel on it so that you could prop the mummified coworker against a wall at an angle, so he'd be completely unable to move. (If left standing upright, there was enough flexibility at the ankle to allow one to hop away, albeit not quickly enough to avoid being recaptured.
Also, there's been a big debate over the years between which is better - air dryers or paper towels. Any environmental arguments (oh noes! Think of the trees! Then again, save the wheat fields - recycle toast!) are purely secondary to arguments about which is more sanitary. There have been a few articles in nursing journals about paper towels being more sanitary. Risk (as mentioned in this thread) of air dryers blowing bacteria contaminated droplets is pretty high. Also, iirc, the warm surfaces (not the heating elements) inside a blow dryer provides a good place for bacteria to grow. I took a look on Google Scholar for articles. I found none that bashed paper towels. But, there seems to be some debate on the blow dryers - some studies didn't find them bad - about equal to paper towels. Other studies found them to be definitely worse. Regardless, even of the studies that found them on the same level of sanitation as paper towels, they still don't recommend blow dryers in critical areas of hospitals.
Gould D. The significance of hand-drying in the prevention of infection. Nurs Times. 1994; 90(47):33-5
Lee M. Paper and cloth towels found to be more hygienic than air dryers. Health Facil Manage. 1994; 7(8):114, 116
Ngeow YF, Ong HW. Tan P. Dispersal of bacteria by an electric air hand dryer. Malaysian Journal of Pathology. 1989; 11:53-6.