I enjoy the flavor and RP potential for half-elves, and have played them satisfactorily as-is.
But I do think that mechanically, they're a little underwhelming as a "mix" of elf and human. I think their elven side is done well, but their human blood is poorly represented. Multiclass:any just doesn't pull a lot of weight in a system with Prestige Classes galore (many of which are just souped-up extensions of standard classes -- hello Shadowdancer, you super-rogue, you?), the option of evenly balancing non-Prestiges, and house rules nixing favored classes as outdated and too much hassle... Also, the favored class represents the versatility of the human blood fine, but the lack of either a skill bonus or a feat bonus calls into question (from a mechanics echo flavor/definition standpoint) how a half-elf learns fast enough to cram that versatility into his short life span.
Basically, WotC should realize that many people just toss the multiclassing penalties (and favored classes along with it) and provide an alternative set of human and half elf bonuses to go with such house rules. Say, humans get an extra skill point per level and bonus feats at level 1, 8, and 15, half-elves get elven blood and a bonus feat at first level and a skill point every other level.