Already available in most phones
Just look at a little app: http://world.waze.com/
A whole lot more comprehensive than just showing "holes". Though it doesn't go and show each municipality where what happens - it would be nice if someone could go and do such though. Any type of problem, from accidents, dead traffic lights and other hazards can easily be shown to all. And you can then be updated to see where these are, since all reports are shared to all members - thus you can "try" to avoid these problem areas.
Here in SA we've gotten so fed up with the non-existent service (or rather corrupt government officials using taxes to line their pockets without doing anything to the roads) that there's now a private organization (read: insurance company) to which you can report potholes: http://www.potholebrigade.co.za
Typical South Africa: we pay huge taxes, then we have to get a private company (taking more of our hard earned bog-rolls) to actually do what the taxes were meant for. They started about 2 months ago ... and already over 4000 potholes filled (or at least they state so on their site). I like their "politically correct" phrase: "... in conjunction with the Gauteng Provincial Department of Roads and ..." - Sarcasm like there's never been before!!!!
I think the insurance co has ulterior motives (besides the extra adverts), since there's constantly people breaking wheels, axles, etc. And the insurance cos then end up having to sue the roads agency - which of course takes years to even get heard in our overloaded court system. Which means a 6 month old pothole here is considered a very young hazard indeed!
"Marmite" ... ha ha ha ... we're lucky if the roads agency goes and throws some gravel into the sink-hole (when you need rock-climbing equipment to get out of the car after driving into one it's not called a pot-hole) after numerous cars have been written off in that specific spot. Look at some of the photos: