I have not upgraded, still preferring to stick with Snow Leopard, but from what I have read, others have said that iWeb does work with Mountain Lion. You still need to make the Library visible and you might have to download an app called iWeb UserSites that allows you to open domain.sites files individually, but other than that, it should work normally.
You won't have to re-build your sites in any other programme and if you have iWeb on your Mac, it is an app and you can still use it for as long as it continues to work with the OS's.
Remember though that the MobileMe component no longer exists - MobileMe ceased to exist on June 30th this year, so it has gone by over a month. Also note that Apple no longer supports iWeb and has not done so for a few months - that came with the decision to ditch MobileMe in favour of iCloud that does not offer hosting. iWeb does not ship with new Macs and is not sold in the Apple store. If you want it now you have to purchase either the iLife 09 or iLife 11 boxed set from Amazon. As iWeb is an unsupported product it will not receive any further software updates, so there will come a time when it will no longer be compatible with the latest OS - this has not happened yet with Mountain Lion, but will do in the future.
What you can do is keep a copy of Snow Leopard on an external drive and just switch to this when you want to use iWeb.
Also, remember that you need to back up your domain.sites files that can be found under your User/Library/Application Support/iWeb/domain.sites. Note it is your User Library and NOT your System Library. If you have no back up of your domain files, then you are definitely looking at re-building, but at the moment there is no need to and as far as I have seen, iWeb still works with Mountain Lion.
