I tried using peat pots for my lettuce last year, and seemed to do O.K. When we dug them up though, no roots had come through the peat! The pot was chocker block full of roots, but somehow the peat had stopped them spreading.
I'm using plastic pots this year to get (almost) everything started. They might not seem as environmentally friendly, but at least I can reuse them.
:-* Tricia