Actually this setup is really nice, by including the use of reltool it makes life really easy for distributing your code. Reltool is like a jar file in the java world - except it actually includes the entire erlang runtime. Thus eradicating shared library nightmares.
You should also mention Mochi Reloader and Distel. The first one takes no time to set up and removes so much friction from the dev process. Distel requires some set up and learning time, but that will pay off very quickly.
Webmachine uses Mochiweb behind the scenes, hence the reloader comes for free in this setup.
Distel is specific to Emacs. In this series I don't want to discuss which editor to use (esp given I prefer using VIM ;)) as that can come across as constraining. I'd rather leave IDE/Editor discussions elsewhere.