If you open up the Apple System Profiler and click on the superdrive in the Devices and Volumes tab. You will notice that by Product it says DVD-RW. With this info I went and bought a Memorex DVD-RW disk and tried it out. I am pleased to report that it works just like a normal CD-RW, erase disk with Disk Utility etc.
It does burn at a pretty slow speed but this is still great for system backups.
[Editor's note: It was my understanding that this worked, but wasn't necessarily fully supported. I have also heard the DVD-RW discs will not work with iDVD. However, I have not yet personally tried a DVD-RW in either the Finder or iDVD.]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20020324104258132