Yes, dollarization is good for developing nations, because it gives the nation one fewer thing to do besides develop a currency. The country can focus on other things, rather than trying to keep their currency strong. It also makes nations want to do business with that country, because they are a more stable business risk.
The reason it is good for developing nations is because it gives them back up and a good investment. The dollar is the international currency and, as always, the most stable. There are even black market places for dollars in countries like Argentina and, I believe, Brazil. So it's good.
As long as it is temporary, dollarization can be great for boosting a foreign economy. New companies that come in will have a currency that they are comfortable and familiar with and local businesses will get exposure to a currency that will more likely then not become very familiar with. But it should never be a constant flow of cash in just to keep that economy afloat. It should be like jump starting a car, once you do the jump the car runs on its own.
When a single currency is used by multiple countries, an economic collapse by one of these countries can have severe consequences on the economies of other countries. Encouraging dollarization could be beneficial to encourage trade and development, but during an economic meltdown - such as the one experienced by Greece - it can devalue the currency in other countries. This would eliminate any gains experienced by developing countries. A balanced approach which still compartmentalizes currencies can reap the benefits but will limit the risks.