I remember it being sort of invasive and causing some weird stuff before. Anyone on mountain lion and using it without hassle? I must reiterate, this is a long time ago, like in its infancy. I just don't feel like installing it right now if it's going to be a hassle. Just hate making new projects in logic just to record a cool thing when I pull up kontakt.
Have not used Soundflower since discovering Jack http://jackaudio.org
Might be worth checking out.
EDIT: I guess it is worth pointing out that Soundflower will work for duel channel stereo between applications on one machine, but if more channels are required or the applications are on different networked machines, then Jack may offer a better solution.