I've never used one, but I guess it could be entertaining at times, like when I'm working at my desk (but not using my computer) and keep my monitor on.
Too distracting and processor intensive for my liking -- hiding all windows to reveal the desktop will be even more of a slog on my laptop. And the chopped frame rate that would result would be unacceptable.
Depends on how animated wallpaper is being implemented.
On Vista Ultimate, a dynamic animated wallpaper can use basically 0% CPU. It's all GPU based.
But you hit the nail on the head -- it's not about whether they're animated as much as whether they're attractive and slow down the comptuer. I'm not about to give up any performance in order to have an animated wallpaper.
The question for me is whether Windows Vista will be where we turn the corner and can actually do this stuff without slowing down our machines.