i have worked like this more often than not. in my experience it has an amplifying effect: good people get better; trying to manage poor people remotely fails miserably.
The trouble is that developing most software is a group activity. The result is more than the sum of individual contributions, it is also a function of how well the team works together.
Someone might be a competent developer in their own right, but not a ninjarocksuperstar. Still, if that person can understand three conflicting ninjarocksuperstars' points of view and see how to reconcile them and build a consensus, it might be the most valuable contribution of anyone on the team that day.
One of the problems with managing something like a software project is that it's very hard to measure this effect. If you're in an office where people are interacting regularly, there's usually an easy alternative to measurement: ask everyone who helped them do their job the most lately, and the guy that 75% of your team name is the quiet one who works in the background to keep everything ticking over. If everyone is 100% distributed, that guy might not be contributing at the same level as everyone else, but that's because you're not taking advantage of his skills and your team is weaker for it, which is your mistake and not his.
(I try to be consensus guy regardless of coding skill, but I'm not sure how good I am at it. That's why appreciate when there is someone who really is good at it on the team, even if their personal coding skills are merely average.)
i love it. now back to work :o)