Hackers Think Cookies Are Tasty, Too
blog.tinfoilsecurity.com
blog.tinfoilsecurity.com
That said, as far as the server trusting cookie values to do database lookups or whatever, sure, there's a hole there. Most folks will use something like HMAC-signed cookies in those cases, so that an attacker would have to be in possession of a secret key in order to successfully have altered cookie data accepted by the user. But in any case, the data should be treated like any other user-supplied data - untrusted and to be sanitized.
Reflecting the attack through the cookie makes sense if you can find an XSS-vulnerable page that you could use to deliver a payload that can be used to write a cookie to leapfrog the XSS attack to non-vulnerable pages, but that requires a pre-existing XSS attack and a vulnerable usage of cookie data; the simple ability to modify cookies isn't inherently a vulnerability.
If you can actually force malicious content into someone else's cookie, then absolutely, all bets are off. But the vector as described in the article seems to be entirely benign - just because someone can alter their cookies doesn't mean they can XSS other people.
Of course, cookies are still client-side data and should not be trusted. But XSS is not a problem here. Correct me if I'm wrong.