@drammock yea I also noticed this function. I think that it is suitable for MEG which can collect empty room data, or for ERP analysis as there is usually a pre-stimulus baseline. Do you think it is suitable for resting-state EEG too?
I am hesitating as I notice that there is a thread noise covariance matrix in resting state eeg data - 
Support & Discussions - MNE Forum which the make_ad_hoc_cov was recommended.