<p>WPF's view model oriented way of doing things makes it very tempting to just use business objects in the UI. Have you seen any issues with this? Why or why wouldn't you do this?</p>

Not being a WPF guru, I can't be sure, but the usual reason for separating your M, V and C is so you can test the controller independent of the view, and the other way around.
Nothing stopping you, of course, but it should be a lot more testable (ie, unit tests) if it's separate. The MVP pattern, which is usually the one that MS promotes, is more geared around the presenter (ie, your WPF form) having more control, and thats fine too....