Heard this too, have no interest in trying it - ammonia and fabric is not a combination that I'm fond of.
It's a laundry detergent but it's more gentle than most of the detergents you will find (like Tide or All), I think it has to do with the lack of surfactant or something like that. But with modern HE detergents (especially if you go with "free and clear" (which I do, because the dyes can sometimes react with my skin)) I think you're already talking about very mild cleaners to begin with. Woolite was, as the name implies, originally for washing wool (and anyone who's tried to wash a wool blanket can attest to how easily a laundry machine can destroy them).
As far as hand-washing, what I did was:
Took the lid off of a DVD-R cakebox, like this:
Filled it with some lukewarm water (most laundry detergents will not break down or activate in cold/tap water), added a very small amount of detergent (I use HE detergent for my HE machine, if you have non-HE detergent you need proportionally more because it's less concentrated), and put the earpads in (this case it was the pads of my K701, but the same idea applies), and just messaged them for a little while. Now with the HE detergent you don't get bubbles (because it doesn't have a surfactant), which I think is beneficial with foam (there's therefore no bubbles to get out of the foam).
Then I took a second lit, filled it with cooler water, and rinsed them out in it (I ended up filling and emptying this one like 3-4 times; once the water takes up soap from rinsing it has to be changed; this doesn't mean you gotta fill these lids to the top, fill them like as thick as the pads are with water).
Then I put the pads out to dry. But that was taking forever, and I wanted my headphones NOW. I also was afraid of mold growth if the foam on the inside never dried fully. So I wrapped them up in a t-shirt, wrapped that up in aluminum foil, and put it on the "shoe drying" attachment of my dryer (it's a shelf that you add that prevents the item from being thrown around) and put the dryer on "Extra Low" for about half an hour and they were mostly dry by that point. They finished out the night on top of my AV receiver while I watched a few movies (hey, it gets warm!) and they were usable by the next morning.
With primary contact surfaces like earpads, especially something with electricity, I'm sure the standard warning about fabric softener should apply (much the same reason you shouldn't wash children's pajamas in fabric softener - it increases flammability), but seriously screw that . If you're going to use softener, put it in during the "rinse" phase or you'll effectively trap the detergent and whatever grime exists on the pads in them (and you'll have to re-wash them - this is also why you shouldn't add softener to a non-automatic washing machine with the detergent, because it will have the same effect; your clothes will look dingy and feel disgusting).
Edited by obobskivich - 9/25/12 at 9:59pm