I have the equipment that you discribe above (flextone 3 + HD500) And is an awesome combination!
Now about:
1. Best Seting is to use full model of the HD, with the 4cm, and connect the flextone to your computer (via midi) use the line 6 edit on flextone and set it to tuner.That way you will use the speakers of the amp as speakers without any simulation of power amp, same like a FRFR,
2. Not any downsides.
3. It is awesome aproach, worthy, and onether thing you can do is to use the 4cm, pre or full model on the HD, and a model on your flextone!You can discover some great new tones you never imagine!
P.s. Try the full amp plexi 45 from your pod with the ac15 of you flextone. You will remember me ;)