This is the default operation for MELPA, which arguably has more popular packages than ELPA.
It works fine.
should something like a change to the docs really result in a new release?
Yes. Unconditionally.
Every patch is probably a feature or a bug-fix to some aspect of the package. As a user, I want those as soon as they are available.
How hard it is for people to actually update version timestamps themselves or to just stick to the *-devel repos if they don't want to cut releases?
As a package-developer, I may release patches weekly, but I update main versions maybe once every second year, if/when someone bothers me about it.
Not having to version things manually is a god-send.
How much was the demand for something like this in general? I can't think of any major Emacs package that does rolling releases.
All of them does, if they're on MELPA. That's what MELPA does.
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Jostein