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Surely it would reduce the number of comments as it still loses some.

As the author says - a CAPTCHA solution reduces comments significantly, lets say by 50%. So if Mollom marks 10% as spam, and half of those are actually legit, 2.5% of comments are lost.

But that's not a bad price to pay for getting an hour of your life back a day.

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No, you don't understand. It prompts for a CAPTCHA after the user has submitted his text. So if I just wrote out a paragraph of a comment, and submit, I wouldn't want to have that paragraph NOT show up just because I'm too lazy to enter the CAPTCHA. I think the people who won't enter the CAPTCHA will be far smaller with this method.

CAPTCHAs have become difficult and frustrating. They definitely discourage participation, regardless of how they are integrated into the system.

Does it simply discard them, or leave them someplace for approval?

I'm using Akismet on my blog, and comments considered spam are held in limbo where I can approve or delete them. No comments should be lost unless I accidentally misjudge a flagged comment.

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