Is the "send to SharePoint groups" behavior such that it only adds users to the alert list that are in the SP group at creation time? That is, later changes to SharePoint groups (by adding or removing users) are not reflected in the list of alert recipients? This is the behavior I am observing... wanting to make sure it is the correct behavior of the product.
If this indeed the case, the power of using groups is severely limited here, since admins would have to modify, potentially, many alert lists if there are changes to the group membership . Again, if this is the case and there is some SP limitation that prevents a realtime update to the alert list from group modifications, it would be a great feature (albeit a workaround) to add a "group update" feature that would reflect the changes in a sharepoint group (or AD for that matter), into the alert list.