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So what does this type of XSS do? Mostly embarass people because defacement examples are posted to "look what I can do" forums (which is basically what happened). Think about the attack vector here, they have to get a victim to visit their specific url that includes their attack. How is that done? Malicious email, posting the link to some website or forum and hoping they find it and visit, embedding the link in other sites that have been hacked or something like a banner ad, or whatever. All of these involve the target going out of their way to visit this maliciously crafted url. When you consider that they could still do all these things without XSS and simply host malicious code themselves, all this reflected XSS is doing is making it a bit harder for an end user to spot that this is something non-standard and dangerous.
Think of it this way, "With reflected XSS, I can send them a link, and if they visit it, I can do bad things to their computer!" but then again, you can do that without XSS too, it just isn't quite as effective. How many users are taking the time to carefully look at a link before clicking on it, checking to make sure it contains the domain name they expect and not just an IP address, or a domain name that is similar, but not quite right, etc. A user who is doing this sort of thing will more likely fall victim to this XSS attack, but most users, who don't scrutinize things at that level, were just as susceptible to a classic phishing/malicious linking attack anyways.