I have always viewed the Emacs/Slime/CL development environment as being a more frictionless approach than the compile/link/execute approach of most other languages, but I get the impression there are people who evangelize "image-based coding" without having tried it out themselves.
The idea of not maintaining properly documented sources would terrify me.
As people point out, if you are not careful and execute arbitrary code in the REPL, your source and image can drift out of sync. When I was working on [1], I would go days without relaunching my image, but all the development was done by evaluating code in Emacs buffers and seeing the results right away. Occasionally, things got convoluted enough that I relaunched the process as a sanity check.
For me, the real benefit of iteratively modifying a live image lies in the sense of flow it engenders. I have not felt that sense in languages other than CL. I sometimes explain the feeling by saying than CL is the only language that I don't feel is fighting me.