is anyone using it anyone out there using it...
Yes we use it for a number of our internal clients. See for example http://epmu.org.nz which has a subsite http://workrights.epmu.org.nz/
is it in active development awaiting bug reports..
Yes as we constantly use the module for clients (I have implemented it http://oceanicnz.co.nz/). As you find issues you can track them at http://open.silverstripe.com/query?status=replyneeded&status=new&status=inprogress&status=reviewed&group=status&milestone=subsites+0.1 . Those tickets are the last ones assigned to subsites for 0.1. Once they are fixed you will see a 'stable' version released. But saying that I have not run into too many issues with it. It just needs some polish. If you come across issues (as always) we love to see bug reports / feedback.
handle a number of client websites
This differs slightly from our standard use case for subsites. Its more designed for clients who run promotion sites or several sites under the 1 CMS. I suppose running your own clients under subsites would work as it would mean you would only need to upgrade 1 piece of core code to upgrade over all the sites but the side effect is if you develop a custom page type (eg a 'SuperCoolGalleryPage.php') then I believe each of your subsites will see that SuperCoolGalleryPage.php - which depending on the type of work you have good be a advantage or a disadvantage.
Also note the performance of running several sites from 1 DB will also be slightly slower (especially if one of the sites is being quite busy) but then again depending on the type of site it could be a non issue. As long as your clients didn't want to take the site else where or change developers then having all their data combined isn't an issue but if they ever wanted to change developers providing them with the existing site (as quite alot of ours what when they change hosts) could be a complex task.
I work from home in Khandallah
Probably just down the road from me then :)