Yep -- works very, very well actually. Incredibly fast restores, reclamation is fine (smaller volumes are better), and TSM even has some optimized stuff around disk-based SEQUENTIAL volumes.
I was actually originally involved in a rollout almost 4 years ago (was a customer at the time) using TSM 5.3 and an FC direct-connected NearStore R200 with 320 GB SATA disks for the primary disk pool. We already had a FAS960 at the time (used solely for iSCSI for a while) and were very happy with NetApp core technologies around data protection (RAID DP, rebuild times, WAFL scrubbing/checksumming/etc.) and the price was doable using SATA disks (brand new at the time).
Tivoli's incremental forever methodology was what made the disk cost affordable as well (backup deduplication wasn't really out there at the time and we'd been running TSM for 2 years with tape). Once we were done, the backups each night flowed into a 500 GB or so RANDOM pool first (just local RAID disk on the TSM server) which had a very low migration threshold to force migration over to the R200 which had thousands of 10 GB SEQUENTIAL FILE volumes (scripts to define all those volume of course). Backups were cut off at 5 AM for morning processing which involved a copy storage pool from the R200 primary pool to two tape storage pools (with 5.4 (or maybe it was 5.5 😉 the 2 "copy storage pool" operations could run simultaneously which helped with morning processing). The vaulting was actually handled by an addon product called TSMManager (tsmmanager.us) which also is much nicer to use for day to day work plus gives a lot of historical information for free basically (hardly any setup needed).
About 9 months ago (shortly before starting my current job as a VAR systems engineer), along with updating from 5.3 to 5.5 we overhauled from a single R200 to (2) 3040's -- one with the disk from the R200 and the second with 1 TB disks in a remote location (1 mile away) connected via private fiber (using 2 FC switches to use the long-haul fibre between the 2 locations).
Here's the first presentation that really got us going on this...
http://tsm-symposium.oucs.ox.ac.uk/2005/papers/Understanding%20Disk%20Storage%20in%20TSM%20(Dave%20Cannon).pdf
Updated version of that presentation here....
http://tsm-symposium.oucs.ox.ac.uk/2007/papers/Dave%20Cannon%20-%20Understanding%20Disk%20Storage.pdf
Tivoli is fun stuff....definitely not a "backup system" but more of a "backup/archive framework" that you can build your life into with incredible flexibility (most recently proved again to me watching my former coworkers do pool migrations from all SDLT to LTO4....smooth as silk).
Come Tivoli 6 the link below covers a VERY exciting possibility....snapshots, NDMP & TSM working together.
http://vmwaretips.com/wp/2009/02/19/goodbye-backup-agentsgoodbye-vcb/
I could ramble for a while longer....but think this is long enough.
