NO, NO, and once again I say NO. Somewhere in the world someone may have a good reason to do this. I can not think of it but hey, I do not know it all. I have seen places that have Instances with all three database types and I told them to change. My thoughts are simple really. I have two major reasons why I think that this is a horrible idea.
1. Security – I do not know about you but I do not want a Developer to have to call me everytime they need something changed in the developement environment. That would turn into my entire day. I am a fan of giving them the sysadmin role in a Dev environment and then they can do anything they want. Break it and I just do not care. I can rebuild anytime from production so whatever. If I have Dev and Prod on the same server well then I can not do that without running the risk of some Developer doing something that brings the system to its knees and affects production or even dropping a production database. (Explain that to your boss)
2. Patching – How can you do validation testing on Service Packs and things like that when you have Test and Production on the same instance. Service packs are applied to the instance and not the database. That means that you have to test the patch in production and that is no good. (Again, explain that to your boss.)
Those are my two major reasons for not allowing this practice. I know you can save money this way but it just is not worth it. Just my two cents though.