I think this model is practical for many web apps. The UI and the data layer are bound by very strict syntax rules and requirements. These interfere with the interaction of objects in the "domain" that a user is interested in. Therefore, you would introduce a domain model in the business layer that is free of the constraints in the UI and data layers. I have seen web apps that actually do this. The trick, as you have indicated, is to get handle the interaction of the domain model with the UI and the data store (the problem of updating).
The MS Prescriptive Architecture Group has posted an excellent paper on this subject at http://msdn.microsoft.com/architecture/default.aspx?pull=/library/en-us/dnbda/html/BOAGag.asp. I highly recommend this article to you.