I've had pretty good luck with it. I don't use the friends list so I can't comment on that, but I don't think I've had to wait more than 2 minutes to play a game, and that was after my computer hadn't been connected to steam for 2 months. I'm on broadband though, that autoupdate would really suck on dailup.
My main complaint is that I don't think valve tests their updates enough before release. CS:S has started to crash on my once every hour or so after a recent update. Its not very frequent so its not a killer but its annoying. I'm always concerned they're going to break the game totally for me, as I hear thats happened to others.