That's a great little video by James. I'll link it from the how-to page.
I alluded to this over in your SW fig thread, but I find arm swapping to be great for giving some variety. For instance, I had a bunch of the old SW Jedi torsos which work great as peasants, but they get a little repetitive. So by swapping out the arms I got some variety:
Another good use is to help get a consistent color scheme for your army. Say you have a Black Falcon army - basic blue/black color scheme:
Now you want to increase your ranks, and you've got a bunch of these two figs.
Those are good generic torsos, but unfortunately, if you mix together those three types of figs, they won't look like a single army. So you swap out the arms for either blue or black, same with the legs, and give them consistent headgear, and suddenly you've got a consolidated force.