From what I uderstand merck has filed a patent for topical finasteride, so my guess is that it works if the proper delivery solution is used... There is a company that makes liposomal finasteride outside the US, here:
http://www.lipoxidil.com/site/fina.php . Also I read an interview (I think with Dr Lee) that said it is effective but merck made a pill because they felt it would be prefered over a topical.
My only concern with a topical would be that the residue could contaminate things and maybe get into the system of pregnant women.