I've used it once, but it tends to be a fallback once obfuscation and beandipping fail. The problem I found is that it can be a little confrontational, and gossip queens who are told outright that you won't supply them can take it badly.
Maybe, but this is a perfect example of etiquette not being about making people comfortable. People who are gossipping should be made to feel uncomfortable about it because it is inappropriate. "That topic is not open for discussion" or my personal favorite "I don't want to talk about that. It's none of my business" are perfectly polite ways of letting people know that what they are doing is rude.