Hot oil systems are often used in certain areas of process heating, but my experience would say that it would be overkill for brewing. Oil is a good heat transfer medium, and there exist many different types of oils that are used for a multitude of situations, usually when you're interested in heating process fluids and a steam system of appropriate pressure doesn't exist or if you have a number of small users and you don't want to direct fire each of them. You could use a fryer for control of mash, kettle and water temps, but it seems dangerous to submerge your kettle in the fryer (boil over, as noted previously, could be a major fire hazard). The normal way to control a hot oil system is to keep the oil at a constant temp (fryer setting, I would assume) and then control the flow rate of oil to the vessel you would like to heat. You could jacket a the vessel, but that would be expensive, or wrap a coil around the outside, or submerge a coil on the inside (much as you would a wort chiller). In this case, it would probably be easier to pipe it up so that you circulate the wort or water through the fryer. I say this because it's safer this way for us home users. If you spring a hot oil leak, you could spray anyone near by with oil hotter than boiling water. I have no idea how the fryer would respond if you leaked wort into it. I'm assuming it wouldn't be happy and depending on the leakage rate, it could be just as dangerous. I would think the expensive part would be the pump(s), assuming you have a fryer lying around. I suppose the reason it isn't done is that it's just easier to direct fire and insulate, and not too many have a spare fryer lying around. I'll tell you, the more I write, the more I want to try this. Ok, I'm done nerding out.
