I love MS Flight Simulator, as well as Laminar Research's X-Plane. Flight Simulator is great for instrument flight and X-Plane has the best physics available in a commercial sim.
I think they make a huge difference. On my very first training flight I did everything except operate the radios. I taxied, takeoff (is that a real word? haha), turned, climbed, descended, and even landed the sucker with only the slightest help from the instructor. And since I always flew around my home town of Dallas, TX on Flight Sim, it made it all the more easier when it came time to fly around in the real Dallas.
While Flight Sim isn't great for honing your skills, it certainly teaches the basics. Granted, you can't pop a wheelie in a C172 in Flight Sim or perform realistic short or soft field takeoffs or landings, it does a wonderful job at teaching the basics. For most people, these are easily transferred over to the real thing when you being your training. Yes, the real thing handles very differently than the sim and it has a whole different "feel" to it, the basics are all the same. If you can do straight-and-level, turns, landings, take-offs in Flight Simulator or X-Plane, you will most likely be able to do them in a real plane without killing yourself. They won't be pretty, but it's probably better than the other guy who has never used a simulator, before.