To Suggest or Not To Suggest

Ajax has been one of the most hyped technologies in recent memory. However, much of the hype is deserved. It really has changed the way we (web developers) build applications and the expectation of users. One of the archetypes of Ajax is the auto-suggest text box. I don't know who first came up with, but I first remember seeing it on Google. I think it was once a "special" version of the Google home page (Google Suggest?), but not it is standard:

It makes for a natural option on search text boxes. Here it is on some of the other search engines out there. Yahoo:

And on the search hotness, Bing:

Of course pure search engines are hardly the only sites that have search and thus have auto-suggest text boxes. It's pretty useful for ecommerce sites too...

As you can see, some sites have gotten creative with their suggestions. Here is another great example of that from Apple:

All of these examples are for search text boxes. If what you want is not suggested, you can still type it and the application will perform a search on it. A little more interesting example is on Facebook:

Here there is a "closed list" behind the suggest box: your friends. However, it is still a search box. If you type something that is not in the list, it will still perform a search that will return results. Of course, really all of the suggest boxes have a closed list behind them as well, but that list is probably much bigger than your list of friends on Facebook (unless you are Robert Scoble.) So the theme continues: there is a finite set of predetermined suggestions, but if you type in something not in that set, the application can still process your input.
Recently, I saw a different use for auto-suggest boxes: as a drop-in replacement for select/option boxes (a.k.a. drop-down box or combo box). This is fundamentally different than any of the examples above. It would be like the Facebook example, but with the limitation that your friends were the only valid input into the search box. In fact, Facebook has a scenario that is similar to this: tagging people in photos/videos:

However, even in this case, you can type the name of somebody who is not one of your friends. This is valid input. After all, maybe not everybody that you take pictures of has an account on Facebook. My kids are growing up fast, but my five year old son is not yet on Facebook...
I imagine that this pattern -- using auto-suggest box to replace a select/option box -- is used on websites out there. It seems like a reasonable thing to do to avoid a drop-down with a large number of choices, or a drop-down that is expensive to calculate and is often not used. However, it seems awkward, too. What do you do when a user types in something that is not in the box? I like to type, and I'm both reasonably fast at it and make enough spelling mistakes that this could be a common scenario from me.
Now I am no user experience expert. In fact, as a web developer, I would say that I am perhaps the least qualified person when it comes to judging user experience on the web. My knowledge makes me very forgiving of things that might be confusing to others, while it also makes me critical of things that others would not notice. So I am curious about other's people's experiences and opinions. Are there sites out there that use this pattern? Is it useful or awkward?