I have used a NPC that is sort of a DMPC. We were running a high powered game that was going to get into the 20's but start first level with 'uber' stats and magic items given to the PC's while starting out. I used a 'babysitter' to accompany the PC's as a guide through the early parts, that were literally a controlled test for them, and not upstage the PC's...but help whenever I made an encounter possibly a little too tough.

The NPC was capable of fantactic feats...but the NPC was also a young polymorphed dragon serving as guide as a favor to the king. The NPC was designed to allow the party to survive multiple encounters, have access to higher level buffs, and to 'tank' small time BBEG while the party took out his helpers (or the NPC takes on a hill giant alone while the others take on the other two...that sorta thing). Constantly holding back, and constantly on the alert to help out anyone who gets themselves in a tight spot (as this was the first campaign we ran under 3.0, it was very useful to have a babysitter as many goofed up thanks to new rules).

The real problem with any NPC party member is that anything the character says is interpreted by the party as if it is the word of the DM and not the thoughts of the character. As such, i always had to be VERY careful with what was said...lest they get the wrong idea. I kinda prepard for his and had them know damn near everything as part of a plot point that they would find out later. As such, when they asked...the reply they got was usually...'I cannot say. There are things that you must come to on your own. If you do not find such wisdom yourself...you will never be able to stand against what is to come."