Anyone have experience with this?
I forked a consultancy agreement on Docracy  recently to specify any notices take place over oDesk, then requested the contractor agree to it via oDesk's messaging system.
However, I prefer to work under the terms of an agreement, mainly because the employer shows interest in taking the time to formally define his expectations and attitude toward developers.
The one thing that has worried me is being asked, after signing a contract with a company in at "at will" state, to agree to a "gentleman's agreement" to give a month's notice. If that's what they wanted, why didn't they put it in writing?
More usefully, for the OP, if you're a foreign contractor by far the biggest hurdle is trust. For finding a job and for making that job work. Anyone with an established reputation / identity is going to care - likely more than you - that things work out. On the other hand, I guess, people like that also don't have the kind of cost difference you might be hoping for...
What kind of protection are you talking about?
Do you use oDesk for all your development work? The "timeclock" feature they have seems valuable. Is it worthwhile enough to bring an outside developer, one you haven't worked with before, into oDesk to work together?
I think it really depends on how comfortable you are with taking this kind of risk, and how much effort/money you want to put into mitigating them.