I've registered a few domains through 123reg and I haven't had any issues. I don't really know anything about pitfalls though, but I just went with them cause it was the cheapest I could find at the time.
I've always reg'd my UK domains with 123-Reg and despite hearing others complaint of their support I've always found them really good.
The main things to be concerned about are their help/support times for if/when you need it, then other things to look for are how easy their control panel is to use, 123-Reg is very simple compared with GoDaddy for example. Other than that it's down to price I guess, everyone has different experiences with the big domain registrars so I think you can probably find positive/negative reviews of each one. Whilst I reg my domains with 123-Reg I'd never host with them.
I've used them for most of my domains and haven't had any problems. Their control panel is better than anything else I've seen. (Just avoid that "submit to search engines" option like the plague). A friend had noticed some slight difficulties with their DNS servers not being as reliable as they used to be but I haven't hit anything myself.
I wouldn't host with them, but then I don't believe in hosting and registering with the same company anyway.
Yeah I agree with Greg about the customer service.
I use Reg-123 for my domain names and I found thier customer service extremely excellent and I left feeling like they really know their stuff. If only I felt like that when I phone up other places lol.
Did take 30 mins to get through, but hay the quailty of the info was more than worth the wait.
I would say that the only real "pitfall", as Billmarshall says, is
when buying a domain name, if you do not host the site your self, make sure you get the hosting from some where else.
I've found their new online support site with the ask a question section is the best way to get support from 123-Reg as you can send in your support request and get on with other things, and await the e-mail response, I haven't had any issues where it's needed any more than one reply from them, so all good in that way. As Bill and Jaz say best off getting hosting separate to domain names,
123-reg are great for domain registrations. It's simple to set-up with them, and they're a solid company with a reputation to uphold.
Using a company like 123-reg to register your domains is a good idea because it gives you control over your domains. That is, you don't have to go through your existing host if you need to switch hosting provders.