Never used them and haven't had any problems. Of course, I have been fortunate enough to have groups where players wouldn't even consider "level dipping" to get great combos. So that helps.
I have two main reasons for not using the penalties:
1) Book keeping pain. Same reason I don't use XP costs for magic items. Everyone levels together - period.
2) I don't see classes as being some set career, especially since most of it is self-taught while adventuring. Since PCs in my campaign don't go to "fighter school" to become a fighter, and have to go to "rogue school" to take any rogue levels, I can see things being more blended. Someone takes time to practice both their sneakiness and their swordplay, and so multiclass fighter/rogue. In their mind, they aren't trying to maintain two separate things, they see themselves as a "sneaky-warrior". For those PCs who want to pick up something entirely new (like a fighter picking up some cleric), I will try to work in an in-game event to help explain it. In fact, sometimes the opposite has happened, where some random in-game event got the player interested in multiclassing (like when a rogue died, and on a whim I wrote up what she experienced in her brief afterlife before being raised, and the player figured that would be quite a religious experience and started taking some levels of cleric).
But I've also debated having some bonus to those who take levels in their favored class. Don't want it to be unbalancing, just kinda fun bonus since I like the concept of favored classes, but not the execution of multiclass penalties. Either a minor extra ability at 1st level, or I like the idea above of an extra skill point. But I haven't gotten around to deciding on anything yet.