"Haven't any experience with this, but it sounds, on the surface, like
a free
lunch. My gut says adding this much moisture and fine dust to the
inside of
a house sounds like a mold/mildew nightmare waiting to happen. "

Hard to imagine that occasional use of the typical home dryer is going
to lead to mold and mildew problems. The average load of wash doesn't
have a huge amount of water in it. Certainly not much compared to the
amount that a furnace mounted humidifier or even a regular humidifier
can generate. If those don't cause problems, surely a dryer won't.
Dust might be an issue.

Two other questions. Is this safe with a gas dryer, or only electric?
I would think a gas dryer needs to be vented outside. The other
question would be if any codes address this.