In general I think this is a great idea - I've used three different ones over the years, and much prefer it to putting the cats in a cattery. It's also great as you know someone is keeping an eye on the house.
But what I would say is that this was all in London, where people don't tend to know and trust their neighbours, I think may be less call for it in smaller places where people do. My sitters would also pop in and play with the cat for half an hour or so, to stop her feeling less lonely.
We used to pay about £6/7 a day, which covered up to two cats, but it was more at bank holiday weekends and double over Christmas/New Year.
References would be good - but I always used to get sitting services recommended either by friends, or by going to the vets and asking, which also helped.
The main downside, is what happens if the cat disappears? This happened to me once, (from then on she was an indoors cat when I went away) and it wasn't fun for the sitter. Also worth thinking about fussy owners/what people expect. All of my sitters have always come to look round the house first and filled out a questionnaire, not just about the cat but also about where is the stopcock and so on, just in case of emergencies.
the people I used most recently were www.sittingkitty.co.uk, although their website seems to be down at the moment. They were quite professionally run, and so might give you some hints. (dadonmumsnet, might be good for you too!)