The only obstetrical I have encountered so far, is that it requires at least 3 or 4 tries to add a Google user. But afterwards, it's not a problem.
Edit: One of my friends using dukgo.com also confirms this behaviour.
So I basically can confirm that Google did not turn off XMPP federation for their XMPP service. It appears that there is simply no UI to add users from federated servers over hangouts, but it works with standard XMPP clients. So you could say that "Google dropped support for XMPP in their UIs". But you can still use your Google account as plain XMPP service (which doesn't mean that I would encourage it or think that it's a good idea).
But I can't rule out that e.g. some servers can't federate with Google, for example because of policy restrictions.
Because while in the past, my primary reason for installing Pidgin was connecting to Google's excellent XMPP service, I now only have it hooked up to my Facebook account. I don't see any value in Hangouts. That's right. As creepy and closed as Facebook is, I still find it a much higher value service than Hangouts. Plus it actually lets me connect to people I know reliably.
Hangouts is the perfect example of taking a good service and throwing it in the shitters. I can barely use the official Android-client. It's just gone completely downhill.
It may not be too late for Google to recover from the terrible slope they've taken on ever since the persisted, user-hostile G+ fiasco, but I can't imagine the tarnish their brand has taken to ever have been worth it.