Yes, I have used it on a large system, and it does work. On that system, remoting was much more efficient than web services. I'm not sure why remoting isn't more popular.
The renowned expert Rockford Lhotka advocates using it. Basically, he says you need a Web Service if you're going through a firewall, otherwise not.
Remoting is more efficient. Remoting uses binary data vs. Web Service uses heftier XML.
Another expert source says: For apps that require interoperability and must function over public networks, web services are probably the best bet. For those that require communications with other .NET components and where performance is a key priority, .NET Remoting is the best choice .... Use web services when you need to send and receive data from different computing platforms, use .NET Remoting when sending and receiving data between .NET apps.
Challenges include network issues (traffic, latency) and managing permissions. As with all distributed apps, performance is only as good as the slowest part.