FWIW, Las Vegas casinos use facial recognition to recognize card counters and other 'undesirables.' One of my Dad's clients (he's an engraver) was head of security for Caeser's Palace and his assertion was that the cameras were 85 - 90% effective at picking up someone as they walked in the door, and 100% effective at identifying them if they loitered in the casino for more than about 15 minutes. Granted its anecdotal, its backed up by the guys who well these systems to Casinos promising this capability but still.
I've never had a chance to talk to them about false positives or negatives so I can't really put their numbers in perspective but they seem to project facial recognition as a 'solved problem.'
Your anecdote (and goodside's) are indeed a bit scary. Of course, tracking faces within an enclosed space (casino, shopping mall) is not the same as tracking someone's movement throughout a whole city. But maybe it could be applied on the streets of certain “high-crime”, downtown areas and spread from there. I admit I'm troubled by the thought of the executive power available when such a scenario becomes normal. We need to match this technological innovation with some form of social innovation that keeps police accountable, but obviously “who watches the watchers?” is a difficult and unsolved problem.
To track someone through a crowd, you don't necessarily need continuous facial recognition. You can tag the identity to a person once using facial recognition or other means (credit card or ATM use if you have that data), and then revert to a more basic motion tracking system to follow them around.
I don't know much continuous object tracking across multiple cameras, but I highly doubt it's a difficult problem as long as the cameras have some overlap.