My understanding about the Rosetta stone is that it acts as a great compliment to a language course, but on its own merits isn't nearly as powerful as one. I've stolen my buddy's copy for french and, a few lessons in, it seems to do well with vocabulary but not as well with syntax (I was told that it is a good idea to go out and buy/borrow a grammar book from the library before you start). It is true, though, that both the military and the State Department use the programs, so there are obviously some high ranking bureaucrats out there who approve of the program - in fact, I know that the military has their own unique version of Arabic that has more of a military emphasis and contains vocabulary not in the civilian version.
Really the biggest thing against the Rosetta Stone is the cost. Like I said, I am borrowing my copy, but my pal had paid 500 bucks for all 5 "levels" of french; At 100 dollars a pop I suppose it isn't that bad of a deal, but still, we're all worthless humanities students here - what do we know about having that much money on hand?