I won't use it, and don't use it as long as it's a visible image.
I would amend my privacy policy or TOS to use it if G made it invis, but still wanted people to know it existed.
My suggestion: If you want to optimize your Adwords profits, use it. If not showing the graphic on your site is more important to you than optimizing your Adwords profit, don't use it.
I don't use the Google tracking system for other reasons, though: mostly because we have our own system and the data is proprietary - we don't want Google to know how much each visit is worth to us.
My vote: Dump the tracking image.
My instinct tells me that 99% of people won't even notice or pay attention to the image.
Anyone have any stats on how often that image is clicked on at their site? It would be great to see that as a percentage of conversion page views.
Anyway, there are some nice (almost) free tracking tools around on the net with which you can measure the performance of your ads. Why not use these?