I'd love this for a special case -- account recovery. A system where your account is only as secure as a recovery email address and/or knowledge based authentication and/or social engineering of an account-reset staffer is pretty insecure.

Front loading that on new account creation is pretty dumb commercially, though, especially for low end services or non-financial services. You should do something with trivial signup and then progressive authentication. A holistic risk thing vs. binary.