OK guys,
A lot of great answers here, but obviously nobody's taken the time to test them.
Hao Lian gets the credit for the first best original answer, but unfortunately his code doesn't show posts without comments.
Captain Keytar is on the right track, but his code will display every single post and attachment as a separate result.
Here is a modified version of Captain Keytar but it limits the results to the type 'post'.. that has been published (to avoid getting drafts!!)
    select wp_posts.*,
    coalesce(
        (
            select max(comment_date)
            from $wpdb->comments wpc
            where wpc.comment_post_id = wp_posts.id
        ),
        wp_posts.post_date
    ) as mcomment_date
    from $wpdb->posts wp_posts
    where post_type = 'post'
    and post_status = 'publish' 
    order by mcomment_date desc
    limit 10
Does anybody know how to not hard-code the limit in this code, but rather use the global setting that's set in the WP admin?