It's pretty moist around here so I don't have the same perspective exactly, but in my experience I can water less in pots with Sphagnum on top. If I really let the watering go, the top layer goes crispy, but the stuff underneath is still alive and moist. Dead strands like the stuff you get for soil dressings doesn't seem to hold water in a dry environment as well; it dries the same way peat does and is slow to rehydrate.
Like NaN says, I trim my Sphagnum colonies down to the soil line once or twice a year and use it for stuff. It's great for starting Sarracenia cuttings and other plants, and you can usually find people who want to trade for it. It can be obnoxious - I have some seedling pots that are just miserable for moss - but I think it's too useful and easy to grow to forgo altogether.