Lunging can help, but I think there are better ways to do it. I let my horse out loose in the arena while I grab things and he runs around on his own and bucks and snorts and gets out energy. Lunging I think just adds to the problem of hot horses. All you're doing is building up their stamina and not really teaching them much other than running around in circles.
Depending on your riding level, I think you should just get up in the saddle and get your horses mind on you and get them thinking by doing circles, bending, flexing, etc.
Pros of lunging are the horse is able to learn to carry itself properly without a rider. Sure, you can lunge for 5 minutes and get out some of the energy, but often I see someone running/"lunging" their horse for a half hour every time they ride. The horse isn't learning -- You're just tiring him out.
Small circles can be bad for a horses legs, but I think the biggest problem with lunging is it often takes the place of training.