Having used the London bikes when I visited, they really aren't so bad. Not as good as the bike I have at home, but they do everything you'd want out of a beater bike. No one is racing them or anything, just going from one place to another.
There are quite a few cycle hire alleycats around the world. The London ones are fun.
One of my friends rode the Dunwich Dynamo on a cycle hire bike. 200km overnight on a bike that you couldn't service or fix a puncture on... pretty brave.
