I first ran into the moderation in the thread about the Ben Hermans interview, and I think it's great. I especially liked it when only parts of a post were deleted (like one maked "personal attack"), the rest of the post was worth reading so the partial moderation was better than nuking the entire post.
It's funny that it's the known trolls that are complaining the loudest (hi Paul_Gadd!), everyone else seems to welcome the idea.
Wayne, this is a Good Thing (tm). Just make sure you have reasonably neutral moderators (and enforce giving a reason for every time a comment is changed), and it should improve this site a lot (you have to admit, it was getting pretty polarized lately).