Yes, it does work (I think Google changed something in the last 8 months). However, like Kevin Behrens said, it only works automatically if you use the generic Google account URL.
If you use the URLs for your specific domain, OpenID generally expects to be able to get the xrds file from your domain, like example.com. Google does host a version of that file for you, but the discovery mechanism is tweaked to allow for it, so you either have to host it yourself or modify the discovery to read the file from the well-known URL pattern on google.
This is mostly from memory so hopefully I got it right.
See http://groups.google.com/group/google-federated-login-api/web/openid-discovery-for-hosted-domains?pli=1