generally a good idea but it seems to make the IM window think someone has replied to an IM as soon as the person starts typing. With multiple IM tabs they blink quite a lot despite people not really have not finished their replies.
Also it would nice to have this typing indicator as grahpical element like a lamp that goes green if someone is typing instead of the text as it is now. The chat text jumps up and down when someone starts typing and stops and then continues. quite annoying.