First, I think it's important to note that empty space in a design does have a purpose, and putting ads in it can detract from the design. If the ad clashes, it's extremely jarring from a design perspective. Several of the design articles posted here recently make note of the importance of whitespace.
Second, I tested showing ads on news.ycombinator.com, and it partially covered the login link with an ad. I'm using Firefox 2 on Linux.
Zak you're totally right. This product isn't for every one. I was trying to strike a balance where website designers could maintain the beautiful aesthetic they worked so hard to create but also allow website owners to monetize the 20-40% of real estate that most didn't know they had. However if the user keeps their mouse over content the ads shouldn't appear (but we're not perfect :P).
Lastly, we have two detection modes: "Automatic" and "Let Me Decide". The current preview features is set up to use the former. However, you can choose the latter and explicitly lay out the divs you want the ads to appear in by simply adding the "ESAemptyspace" class attribute. Once you do this, we'll make sure the ads only ever appear within those divs. We think we do a decent job of finding your site's empty space, but we know you the website owner can do the best job.
It seems you are assuming a white background- the background should match the color the add is placed at.
For my preview, the add was placed partially in actual empty space and partially on empty space that had a background image.
We have two detection modes (http://www.emptyspaceads.com/publisher/customization_options) that you can use. The preview feature is using the Automatic detection which isn't always perfect. However, you can use the "Let Me Decide" detection which will only cause the ads to appear in divs or HTML elements that you add the class attribute "ESAemptyspace" to. That way you can explicitly tell us where you'd like the ads to appear on your site.
Second, I tested showing ads on news.ycombinator.com, and it partially covered the login link with an ad. I'm using Firefox 2 on Linux.