Yesterday we added a brand new badging incentive system to the Khan Academy. It's really simple for now, round 1, blah blah all that jazz.
We're dealing with all types of internal debates about proper behavior to encourage and how users will respond. We've seen students in schools get extremely excited about very, very simple game mechanics attached to their practice problems/homework/etc, and building the roots of a deeper badging system seemed like an important next step to help us guide users through desired paths in the system.
You can check out all of our badges here http://www.khanacademy.org/badges/view (and I blogged just a bit more information at http://bjk5.com/post/2426884194/khan-academy-now-has-badges). Would love to get some feedback.
I think you're totally right in that small game mechanics can really be the difference between drudging through repetitve learning and having fun.
Looking forward to earning some of these badges :)