this hack has been around for about 2 years or so. the difference is that these disposable cameras actually have pretty darn good quality.
if you pay for a 20 dollar digital camera, the quality is going to be shit. but if you buy this camera (the disposable digital kind) the quality has to be pretty decent since the whole point is to be able to print it out at the film place.
the main disadvantage of these cameras is that they only take about 24 shots (meaning they have a very very small internal memory). hacks exist to make it fit more pictures, but the quality of each picture will be reduced somewhat. still, for the price, and if you're willing to put in the work, it can be a great solution.
another thing, is that a few months to a year ago, they finally got the cvs disposable camcorders hacked, so you can basically do the same thing, but have a 20 dollar digital camcorder as well. the quality is pretty decent, and holds about 20-30 minutes.
you can find more info about this by going to hackaday.com, and search for digital camera/camcorder hack. you should be able to find full links on every aspect of acheiving this hack.