I could see it working in the sense that you could use it as somewhat of a building block to regaining the higher up title. Maybe to build up their confidence after suffering the loss of the World Title, maybe as a means of friendly competition with a partner/friend that turns sour, maybe as a means of holding the title ransom until they get noticed for the World Title. It could work in a variety of different ways, but for someone (let's use Jeff Hardy as an example) to lose their title, lose the rematch and then the following month challenge for the IC title for no apparent reason, it wouldn't work and would seem ass backwards booking.
That is what I thought they were doing for Christian when he returned this year and winning the Intercontinental Championship, after his World Title/Main Event run during the summer of last year, and it would have made sense for him to come back, win the mid card title, dominate the division and lose the title, only to turn his attention back to the World Title after he's dipped his toes back in to the wrestling ring. The same could be said about The Miz, this year, also.
I think that is the beauty of mid card championships, and in my opinion, the better performers and characters are the ones that can fluctuate between tag teams, mid card titles and world titles without losing credibility or looking out of place - Your Kane's, your Chris Jericho's and your Rey Mysterio's, for example. I think a great example would be Chris Jericho from 2008-2010. He returned late 2007, focusing on the WWE Championship. Then had a real personal feud with Shawn Michaels throughout 2008 which kept him very relevant. 2009 came along and his attention turned towards Ricky Steamboat and co. But then eh fought for the IC title with Rey, and he didn't look out of place whatsoever, even though he could still legitimately fight for the WWE Championship, he's just been sidetracked by HBK/Steamboat etc. After the IC title feud with Rey, he paired up with The Big Show and fought the likes of the Colons, DX and The Harty Dynasty, and then using all of that momentum to win the Elimination Chamber and be in one of the main event matches against Edge for the World Heavyweight Championship.
I think as long as there's reasoning behind them going for the midcard title, and there's a little bit of a down period where they are either sidetracked from achieving success through personal blood feuds or some form or "losing their fire" type storyline, then it can be effective in not only revitalizing the mid card title division through the use of some bigger named wrestlers, but leaving a spot in the main event scene for someone else to take up, as well as rejuvenating the character themselves.
Yeah, I rambled.