I guess a lot of it is down to the type of employees as well.
We had a temp a couple of months ago, and for the type of work she was given, you could tell if she was emailing/social networking by the flurry of activity on her keyboard.
If its low skilled/paid administration type work, then I agree, remove temptation, and if possible, put a restricted policy in place.
But if the employee is of a higher pay grade, and expected to be a self starter/motivator, then leaving free web access gives an element of trust and respect.
In reality, you should have good systems in place to be able gauge if employees are being productive or not, and if they are continually not meeting their targets or objectives, then deal with it. If unrestricted web access is the cause, then its a pretty easy fix.
Maybe reward loyal hard working staff members with unrestricted access, which should introduce a self policing slacker stigma
