I believe a manual review would purge any documents that made use of title attributes this way. I'm not sure the algo can detect this type of abuse automagically, but I think it can. Those guys/gals are pretty smart over there in the search engineering departments. ;)
Ya, the intended effect but it is a timed event which means you have limited space. How fast can the person read that has just positioned their cursor over the element? How do they know there is advisory information (a title attribute) associated with that element?
The title attribute can be used on almost every single HTML element we have available. That doesn't mean it should be used. There are a plethora of attributes that can be assigned to HTML elements, that doesn't mean you use them all.
That's where the problem comes in. They are not meant to stuff keywords. Sure, you can provide advisory information that contains those keywords but there better be good reason to do so.
1. Limited space
3. Link associated with image and no anchor text
Those are about the only instances I can think of for using them. And, #2 is really not an option for public consumption.
If I were a Search Engineer, yes, I'd classify that as keyword stuffing. And, I think it would require a manual review in many instances.
I'm going to add this one to the SEO Myths topic when time permits. :)