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1. There’s nothing wrong with Photoshop. It may not be the ideal tool for web design, but “barely usable interface” is a bit absurd. If it’s crashing on you daily, ur doing it wrong. =)
2. In certain cases I think this is an OK alternative to static mockups, but I don’t believe it’s faster and, except for cases where you need to demonstrate interactive elements, I don’t think it’s any better. I think designers would quickly find themselves designing entirely within the css “box”, ending up with designs that look like dressed-up mockups.
3. As others mentioned, you don’t want to be worrying about cross-browser problems when showing your client a mockup. For example, here’s how it looks in IE7/8.