i have heard of it. i used to run it in my plymouth when i first got it to help flush out some of the neglect of the previous owner. i know people who ran it for noisy lifters all the time.
ATF is high detergent, so in theory it would clean, and i havent seen any serious damage from using it. i have also heard that a quart of ATF per tank of diesel will help keep the internals on a diesel engine clean, but im not sure how true that is.

but one final thought, if you really want to clean out the motor, get some lubromoly or other brand of oil flush solvent so you know it works.