The mouse is better for some things (especially relative/spatial stuff), and the keyboard for others, but interfaces that make you switch back and forth are clearly problematic. Rather than popping up dialog boxes and alerts, Emacs displays results (such as compiler output) in another buffer. If it needs immediate input, it uses the minibuffer, a one-line buffer at the bottom of the screen.
In either case, its full text-editing functionality is available. You can run a directory browser/editor, a web browser, shell, interpreter, e-mail client, irc client, etc., and it's just another text window.
FWIW, Marco Baringer's SLIME screencast ( http://common-lisp.net/project/movies/movies/slime.mov ) is a pretty good example of proficient Emacs usage. That convinced me to try Emacs after using vi for several years.
Also, for you or anyone else reading this thread, http://emacswiki.org/ is the place to go for info.
That said, I often trade the time + context switch of moving to the mouse for a slightly less-efficient keyboard command. Overall it's probably a toss-up, I just like to stay near the home row.
My friend at work uses the mouse a lot and he's very good at using it to edit text.