I've worked as a teacher and used Video Games in class. I teach Language and Philosophy (Germany has Philosophy Classes for kids that can't/won't attend classes in religious education. Also, Germany has classes for religious education, which may startle some American friends.).

Anyway. Basically, in my experience you can use games pretty well as showpieces.

For example, I did a philosophy unit on Utopian Societies once. As part of that, I played the Intro to Bioshock (You know, Ryan's little speech in the bathisphere) and had the students discuss what such a society might look like and if they'd like to live there. Oddly enough none of the kids knew the game, so they were quite suprised when I outlined the game's plot for them.

In terms of teaching, that was a good experience. The students were interested and it had a novel character for them. However, to me it left sort of a bad taste, because it was not possible for the students to experience the game themselves, due to time and technical restrictions. Simply put, I did not have the PCs or the time available to have every student actually play Bioshock.

While using games as showpieces has its charme, I feel like they are most valueable at teaching "soft skills" like communitcation, planning, conflict management or resource management. Actually implementing that in class suffers from the same technological and time constraints though.