Add us to the list of teams that do this. We actually do it physically - we have a classroom/computer room connected to a small shop with large windows in between. The manufacturing and prototyping folks spend most of their time in the shop, while the CAD, animation, web, media, and business teams spend most of their time in the classroom.
Just make sure that one half doesn't forget the other exists! (Large bay windows and communal team dinners help to alleviate this
)