I used to do the same thing with an old mac mini and synergy. But I couldn't quite get the synergy auto restart working consistently after the mini slept. Plus I missed not being able to move windows between the screens.
If you do use this approach of having a second computer running, then on Windows you can use MaxiVista and it will use the second computer as a real second monitor in a similar way this USB adapter does.
i.e. MaxiVista installs a virtual video card and monitor, take whatever is supposed to be displayed on it, ships over the network and displays it on the other computer. You can drag windows over to it as you'd expect and generally use it as any other extra monitor, but it is more sluggish than a real video card.
There was a MaxiVista Mac beta around at one point, I don't know if it turned into a real product, but http://www.screenrecycler.com/home.html seems to do the same thing.
