All of a sudden, the blogsphere is bursting with the study showing how much more productive having multiple monitors is. I started using this over five years ago and can't imagine going back.
I have to agree with ScottH that nVidia's drivers seem to be especially good for this task.
I've had a 1600x1280 and an 1152x864 running for a long time. I just added a new LCD monitor for 1280x1024 and expect to add the smaller 1152 back into the mix after building up a new system.
In my setup, I will have the hi-res right in front of me, the LCD to the left and the lo-res above, center for 'monitoring' apps - IM, ActiveSync, Process Explorer, etc. Outlook 2003 is in front of me with browsers to the left. While developing, VS goes in front and extras on the left (Snippet Compiler, nUnit, debugging apps, etc.)
With the price of video cards as low as they are and monitors getting cheaper all the time (even the LCDs), it's time for you to give it a try.