This is a fantastic idea! Will make remote collaboration much more simple (at the moment we forward ports on the firewall etc. and have dyndns setups - much harder to do this on an ad-hoc basis especially if you're not at home!)
At first I didn't see the point of this but I suppose it makes it easier than messing with firewall rules on your router and pointing a domain at it.
Does it still work with a dynamic IP?
I was running a dynamic dns updater with some settings on my router and everything, and you can definitely do that. ProxyLocal is just so easy though - you just type "proxylocal" and it gives you a url that works, regardless of your ip address, router settings, etc. The other advantage is then you don't have to permanently open a route to your dev box just to let people check something out.