That's a good question, I've never heard of that before. o_o;
Is it in Brawl? It sounds like an amazing technique. O_o
Also, I think what you were referring to when a Link falls after using the hookshot is this:
When a Link uses his hookshot, there is a chance that it will have grabbed the edge (note: this is talking specifically about the edge of a stage, not just the sides), but will have grabbed the edge "too high." Link will swing down as he usually does after grasping the stage with his hookshot. However, as he reaches approximately a 35-45 degree angle (from the stage), the hookshot will "give way" and he will begin to tumble from whatever his position was when the hookshot released itself. One could say this happens because the hookshot isn't fully attached to the stage and, just as in everyday physics, if it were not sufficiently attached to the surface for which it was intended, the pull of Link's weight could, indeed, make it give way. You can actually check this if you pause the game and look at where the hookshot is located--you'll be able to tell almost immediately if it is "too high." This happens many times on Final Destination, but I have noticed a phenomenal amount of occurances on Pkmn Stadium for some odd reason. One reason you may think this happens because of an edgehog is that the edgehogging character may obscure clear view of the edge of the stage, perhaps making the hookshot go too high. Of course, this last bit is just an educated guess--one can never be too sure about these things.
But yeah, I think that's what you were seeing.