For sure, screencasting is spiffy; I can envision many library uses -- the ones listed in the Project Play posting are good examples. As we spend a lot of time showing people how to use the catalog and other services on the computer, screencasting could help a lot. I know that folks on our staff are already playing with Camtasia, and doing rather more sophisticated things than one can do with the freeware.
Alas that I didn't think of anything worthwhile I would screencast. I played with Screencast-O-Matic just to try it, but thought the result was pretty dull. Were I a practicing reference librarian, OTOH, I might have more readily thought of some useful instructional demos. In order to be worthwhile, a screencast should be done for a good reason, and thoughtfully prepared with good planning and at least of smidge of creativity.