I think it works. E.g., if a lvl 1 character puts 4 ranks into Knowledge (dungeoneering), then reads this book, his total ranks are 9. Of course, when he gains a level, he cannot increase his knowledge (dungeoneering), because of the ranks cap, until lvl 6 or so.
Anyway, this trick allows early qualification for a handful of prestige classes (and some feats). However, wealth-by-level prevents most abuse. If cost was ignored:
* first level character can meet prereqs for Impure Prince (normally fifth, can take first prince level at 6)
The following PrC can enter 2 levels earlier:
* mage of the arcane order - wizard 3
* keeper of cerulean sign - wizard 3
* dragon discipe - spontaneous caster 3
* loremaster - wizard 5
* frost mage - caster 3
* dragonmark heir - anything 2
* heir of siberys - anything 10
Saves 1 level:
* green star adept - duskblade 4
Feats that can be taken earlier
* dragonmark feats
(the list is far from complete)