I'm actually comfortable with it if the net is beneficial to anyone. However, cheating hurts only the cheater, so reporting them just seems...petty. If they want to pursue behavior which is harmful to themselves, and my actions would only worsen their situation, I'm not getting involved.
If it were a friend, I would speak to them for many reasons - the loss of respect on a personal level, the risk they are putting themselves at, the disrespect they are showing to the prof, and the fact that they are only inhibiting their own education. I would not report them, barring extenuating circumstances where their actions somehow actually affected anyone else.
Either way, I'd likely let the prof know that something was off, mostly so they could prevent it in the future, but also because I trust their judgement - I can't imagine coming out of that conversation without them letting me know whether or not they think this is a problem for anyone aside from the student involved, which I would take into consideration.
Thankfully, this never came up at my school, and I cannot even imagine it being an issue. We frequently had closed-book, self-timed takehomes, and even for in-class exams, the prof usually left the room and went down the hall to their office, telling us to come find them if there were any questions. Not once did I see any student or group of students taking advantage of the prof's office, and more than once have I taken my closed-note take homes in the presence of others or seen them taking theirs, again always without issue. I think my actual response to seeing a classmate cheat would be stunned disbelief, because frankly, it just didn't happen there.
Of course, now that I've written this, I am beginning to reconsider my initial assessment - I'm now really torn as to whether not reporting this sort of cheating would cause it to become more accepted on my campus, and thus decrease the amount of trust and respect I've repeatedly seen between students and profs. Perhaps I would have reported, just to preserve the environment we had.
It's all academic now anyway. Of course, I wouldn't say any of this in an interview, though how I'd get out of this question without lying (something I am loath to do) is beyond me.