Michelle Garder, Pam Broviak, Bill Greeves and I have just published a paper in the Journal of Virtual World Research. Here is the abstract and link to the pdf file:

The virtual world Second Life allows social interactions among avatars  – online representations of real-life people – and is slowly adopted in the public sector as a tool for innovative ways to interact with citizens, interorganizational collaboration, education and recruitment (Wyld 2008). Governments are setting up online embassies, voting simulations, interactive learning simulations and virtual conferences. While there are  very prominent and elaborate examples on the federal and state level of government, we have seen only a handful of applications on the local level. One of these local examples is  MuniGov2.0  – a collaboration of municipal government professionals who regularly  meet in Second Life. The goal of the group is  to  support each others geographically  distributed implementation attempts to incorporate new technologies in the public sector. Interviews with the founding members and core group show clear mission-specific needs  that Second Life collaboration can support, but that there are also technological and behavioral challenges involved using this highly interactive environment. The article will highlight the challenges, how they were met, lessons learned, future directions of the  project and ends with recommendations for the use of Second Life in local government.