Here is another article from Florida on whether governments should use web 2.0 sites:
"Attorneys, legislators to pull plug on Marco government’s use of social Web sites? Increased accessibility to candidates and officials, public records concerns among the pros and cons being considered in use of Facebook, Twitter"

Update 7/7/09

Spies should also stay off Facebook:  "British spy chief outed on wife's Facebook page" 

Update 6/2

Apparently Judges should stay off Facebook too.  Here's an article about a Judge who was reprimanded after accessing a litigant's Facebook site. 

Original Post  5/18

As the benefits of Web 2.0 personalized communication -- like Facebook, YouTube and Twitter -- become more apparent, public agencies and politicians are quickly looking to these tools to communicate with the public. Several Washington State agencies, including the Secretary of State and Attorney General (links Twitter, Facebook and YouTube at the bottom of the AG's homepage) use Web 2.0 sites such as Facebook.  Here's a PowerPoint presentation from the Secretary of State's office explaining the benefits of Web 2.0 sites. 

Use of Web 2.0 sites is not without risk, however.  As highlighted in this article about the advice of a city attorney in Florida to his city council -- stay off Facebook, there are concerns about whether the use of such sites affects a government's ability to comply with public records, records retention and open public meetings laws.  The city featured in the article concludes:

It is a simple fact that the state of the law is lagging woefully behind the state of the art in communications technology. This presents unique challenges in following the intent and the letter of these laws regulating public meetings and communications of local government.  For this reason, this office discourages the City’s participation in a Facebook page or any similar interactive communication technology. 

Earlier this year the Obama administration highlighted some other issues with the "terms of service" users of YouTube and other Web 2.0 sites, such as one-sided reimbursement clauses and sites' use of cookies to track visitors.  Both were inconsistent with federal law or federal policy. 

Here is an article reviewing the use of Web 2.0 products by governments throughout the country.