Yes, it makes sense from Digg's perspective as a business. But from my perspective as a user, it sucks and I have a severe dislike for it.
Reddit's had this feature forever, I don't understand why people have a problem with diggs version.
Reddit's bar is not on by default. Digg's is. This is a big difference. Having the frame and not simply redirecting means I can't see exactly what the pages URL is, it makes bookmarking, sorting and tagging that much harder. And site-specific scripts break.
The point is, it doesn't do anything to help enhance my browsing session. Being able to read comments on Digg is not a plus as far as I'm concerned. Being able to give a company that makes a website I don't use (or particularly like) my browsing habits is not something I have a huge desire to do. Besides, it doesn't put comments directly on the page. I still have to click through to Digg to read them.
Oh, and http://skitch.com/zadr/bms2t/not-useful <-- Seems to keep happening. Very difficult to read content if I want to do any scrolling at all.
People use all sorts of URL shorteners, if I want to see the content they're talking about, my choices are either to click or ask them to shorten it again. And the latter usually interrupts the flow of conversation.