Having installed Mountain Lion on several machines, turned the dynamic pager back on and run with roughly the same pattern of applications, I’m now finding that performance is vastly improved. I have not been able to replicate the same sorts of drastic slowdowns I was seeing under Lion, and I barely notice when Time Machine kicks in. However, I’ve heard reports that the VM subsystem still falls over if you push it too hard (perhaps on machines with less physical RAM), and when it does, it exhibits the same sort of cascade slowdowns that were present in Lion. It’s possible that they did not fully address the underlying issue but did tune the settings so it happens less often if you have more RAM. This is a significant improvement - under Lion, adding more RAM did not help - but if you have “insufficient” RAM, that’s likely to be not much comfort. Since I installed ML, I’ve seen zero pageouts, which is as it should be - there’s no reason for the OS to swap out if it’s got enough physical RAM.
At this point, it’s hard to make a conclusive recommendation - I’d suggest trying it both ways.
My impression is that performance in Mountain Lion is improved across the board, but that’s what I thought about Lion when it was first released. We’ll see if it holds.