As with all third-party applications, you should install and run this one at your own risk -- the FAQ has more information if you're wondering how things are stored or whether the app is secure. The app is completely open source, which means anyone who wants to can read the code, so if the author of the app was doing anything sneaky, we'd know about it. And yes, right now the app is not violating the ToS, but of course that's enforced according to Blizzard's whims, so again, use it at your own risk. If you're not interested in using this app, you can always update your status here on WoW.com using our own addon -- it's not Twitter, but it will let your friends keep track of you in Azeroth!
But TweetCraft does look to be a clever, solid way to access and post to Twitter from right inside your World of Warcraft game. If you've been looking for a one-stop solution like this, there you go. Do be sure to follow us over on Twitter, too, if you haven't yet -- you never know when we might tweet something you'll want to see.
Update: Apparently the app on default tweets all kinds of things you probably don't want to (like changing zones). There is probably a settings switch somewhere, but as always, user beware.