KK, then what was the verdict? And Btw lock and delete this thread if it really was already discussed.
basically, you're right, and as a Sheik player, I do this every now and then at the proper times. The biggest problem with it however is the lag time that occurs now between transforming, making it somewhat more difficult to transition between the two without being punished.
...personally, i don't think it's THAT bad, but the Wii loading time can be pretty variable at times and thusly screw you over. I've seen discussions on the tactics forum that suggest if you put in two dummy controllers and have one be sheik and one be Zelda, and then kill them off, that transformation time is like 1/3 to 1/2 of what it is usually, since the characters have already been fully loaded to the game...but the practicality of this in a tournament is questionable.
So basically, it's a good idea when it works, but the lagginess of the transfer can cause problems, so most people tend to avoid it. Others however, see the benefits as you do, such as myself, and try to use it when they can to get that KO with greater ease. The problem is that in order to launch them far enough away to allow for an uninterrupted transformation that wont be punished...they normally have to be at a high enough percentage that Sheik would most likely be able to kill someone at anyways.
So yeah...there are the pros and cons as I see them.