Microsoft invented their ReadyBoost technology to take advantage of flash drives and other solid state storage. It basically keeps a record of the most accessed pages of memory, then can write out that cache of most recently accessed items to any ReadyBoost device.
In the case of an SSD, it really works wonderfully. The ReadyBoost cache can be large and the seek time being nill, can provide a good boost in performance. Better than installing the OS on the SSD? Probably not in boot time (though its not far off), but in later use.. maybe.
The one thing with ReadyBoost is it is wiped at each reboot, for security reasons. In fact, it is kept encrypted at all times with fast AES encryption (iirc). This is needed, else you'd have fragments of your personal data in plaintext form in the ReadyBoost cache ;o. So, the one area it can't help much is boot time.
As for the life of the SSD, well they supposedly last as long as HDDs now... We'll see ;)