That will allow you to get a more accurate view of your Sales Pipleline.
We have 7. In the real world (where sales people don't even put their darn opportunities in before they're closed) most opportunities go from 1 to closed in about 3 minutes.
I blame this on managers. I preach: Inspect what you Expect. If managers aren't insuring that the process is followed then the information won't be correct. How do you know if the process works, if you can't track the stages?
Huh? Tell me that!
I would recommend that fewer stages is better. Also, if you can swing it where users can change their stages in the Opportunity View, you will have better compliance and lots of hugs and kisses from the field. (Same for Probability %)