They can soften the light if used in close to the subject. Used farther away, the light will get harder, but you will get feathering on the edge. And yes, it's far more limiting than a larger softbox would be in terms of softness.IMAGE LINK: http://www.flickr.com/photos/inkista/5968838073/
This is me run'n'gun at Comic-Con, snatching a quick shot in a crowded hallway of Karen Berger and Mike Carlin. I used a small 8" softbox (a cheap ripoff of the Lastolite Ezybox Speedlite I found on eBay), holding the speedlight in my left hand. I was probably shooting from about 4-5 feet away. Not super-soft, but certainly softer than direct flash.
5DMkII. EF24-105 f/4L IS USM. @28mm. YN-560, RF-602s, iShoot 23cm softbox.
This is a slightly different setup than the one you're linking to, though. This softbox is a little deeper, and has an inner baffle as well as an outer one, and would take more time to set up, as well as being a bit more unwieldy from the added depth.
Neil van Niekerk has a few demos of using the 8.6" Lastolite here
(OK for work) and here