I've done this on my forum and I love the idea.
I've done this for Admin, Global Moderators, Moderators and Mentors on my site.
The only issue is that when I go to change a member's primary member group, to make them a moderator, say, the drop down menu is blank (since there is not text and it won't show a picture) and you have to kind of guess where your moderator button might be.
The images do show beside the check buttons for the 'additional member group' area, though. Go figure.