The classic example of where this actually works well is in the PHP docs. Yes, you get idiots, but you also get good, real-world examples of a wider variety than the original documentation authors would have been able to produce. It's about the only thing I missed when I jumped from PHP to Python.
I think the Django Book's approach to this is really good as well, where the moderator overhead is implicitly taken on by the documentation authors. That works for them because they treat the document as a project in itself, rather than as a by-product.