This is kind of a late response, but I wanted toss in my two cents in case it's still relevant to your colleague.
We've been circulating our games for just a month, but so far it's gone really well and we've had almost no problems.
We catalog the games individually. OCLC has records for a lot of games, and I've only had to do original cataloging for three (Love Letter, Sushi Go!, and Prolix). Three labels go on the front of the box: a barcode, a "Do not return in the book drop" label, and a list of the contents. I tape up the covers of the large boxes. For small card games like Love Letter and No Thanks!, I've found some clear plastic boxes in which they fit perfectly. Our library system uses RFID, so we're able to tag all of these games, too, which is good for loss prevention.
If it's practical, we'll check a game's contents when it's returned. So far, only one piece from a game (Blokus) has been lost, but like John, we've set aside a small amount for replacement pieces and are building up a stock of bits for replacing lost pieces.
The key is to select games that can handle wear-and-tear, are still playable if some pieces go missing, have easily replaceable pieces, and/or are inexpensive enough that a full replacement is doable. I've found the Gaming in School in Libraries, The Dice Tower, and my local meetup (Portland, OR) guilds on BoardGameGeek to be invaluable in helping to find games that fit these criteria.
These are the games as they appear in our catalog.
Cheers,
PJ