I think the problem is not that someone will try to cheat the system, but there are other factors (even besides feeling being monitored by their boss) that will make this highly disliked by employees.
Using personal badge in doors would give a much better result.
It happens very often that person comes to work at 9 o'clock and then goes directly to a meeting without even starting his office computer. He comes back at 12 o'clock and the system registers that he came to work at 12, which is not the case.
Or he for some reason gets logged out from Sametime and then does not manually login for 2 days.
Many users do not shut down their computers when they go home, so they will be shown online all the time (well, maybe you can force "away" setting).
If you monitor online status, users will think you monitor even their sametime chat, email, phone calls, webcam and activated positioning tracking of their cell phones :)
I think the system will be 70% correct (assuming that users do not actively sabotage it) but I would never use it as any kind of time reporting tool. However it can in some cases show some general trends at the company and users don't even need to know that.