What about all the copyright holders, such as Getty Images, that are circling the water, waiting for Pinterest to start making money so the rights holders can charge licensing fees? Any business model they come up with has to factor in the costs of legally acquiring all the photos they use.
I implemented exactly this for our application about a year ago. We managed to speed up the average backend response times for the entire site by about 500ms. Unfortunately, the cost of the edge servers + the anycast routing tech from a third party vendor was more than the business benefit we saw.
There's nothing stopping you from using a traditional CDN vendor as an application CDN. I spoke to the folks at Edgecast about this a year or two ago, and they didn't have a problem with it. However, it sounds like Amazon made some specific optimizations for application content which could be more appealing.
Also, CloudFlare offers the same service, but with added security and anti-spam features.
We use S3 as our origin, so using CloudFront makes sense from an ease of use and fastest response perspective. Also, CloudFront offers reserved capacity pricing for yearly commitments above a certain bandwidth level.
I encountered these types of problems on Cloudfront-powered sites all the time when I lived in Colorado. I frequently had issues using GitHub, Basecamp, etc. Only solution was to wait a few minutes and try again.