[krstck]

I basically agree with you, except I don't think there are many cases where the usage of "literally" makes the meaning ambiguous. It should be clear whether someone's head literally exploded (are we having a conversation about an industrial accident, or is a person simply becoming angry?). I treat "literally" and "literally" as two words that are spelled the same but have different meanings.

[sparky_z]

Yes, usually you can tell. But the times you can't are very annoying. As a writer, you can be forced into awkward circumlocutions to avoid ambiguity.

[Terretta]

Her head literally exploded at the idea his head actually exploded.