Firstly, the latest Adobe Illustrator version (CS4 and CS5) can do this rather nicely. I forget what the name of the feature was, Live-something. Well, i won't say it's A+ good, but it's pretty good, and the settings can be tweaked.
As far as its benefits, I used to design heavily using Autocad, and stuff like this would often come up. We'd get an old blueprint, scan it, and trace over it to get the vectors in Autocad files. So if it worked well, it could save drafters a ton of time. Unfortunately, they don't work that well at all, at least not the ones I tried. Even if it "looked" ok, the amount of tweaking you'd have to do to finalize it is almost more work than doing it from scratch. It's something that I just couldn't efficiently insert into my workflow.