I understand your feelings on this, but I suspect that depends upon the degree to which someone is able to compartmentalize and multi-task. Having a work life and a personal life doesn't have to be an either/or proposition, even if you work for people you know. I freely acknowledge that it's not for everyone, however if you have the ability to structure your life properly, it can work wonderfully for both parties.
One of the biggest pluses would be the personality aspect. You can interview and hire someone with a stellar resume and great interview skills, however you cannot truly know their personality until you work with them, and personality is one of the things that can make or break a working relationship. As the article touched upon, you often better know the strengths and weaknesses of those closest to you. This allows you to find the best fit for someone's personality and skills, which benefits everyone. Additionally, your friends and family are likely to give their absolute best effort because they're not just a part of your business, they're a part of your life. That's not always the case I know, as I'm sure we've all heard horror stories of friends and family who have taken advantage of such opportunities. But implementing the steps outlined would aid in preventing such situations, or in remedying them quickly should they arise.