I think it's a good idea to utilize the Busy Flag and as Erik says, you should include a timeout. Normally an LCD is not prone to failure, but they may become unconnected.

My Ceibo ICE requires me to open the case to change the crystal frequency. In order to open the case you need to unplug the LCD. If you forget to plug it back in, then as you can imagine, the ICE does not function for the reasons described here. Then you have to open it back up and fix it... Would it be better for the ICE to function without the LCD? It's a matter subject to debate I guess.

One also needs to observe the correct address setup time (RS) before E goes hi and the data delay to read time that is required after E goes hi and before you should read the data. This is true while reading the Busy Flag too.

I personally find that LCD's are sooo slow that it's better for my code to write to a virtual LCD buffer and have a low priority task do the job of copying the buffer to the physical LCD. Kind of the same mantra as using interrupts for the UART. Why waste time waiting for individual character moves?