How would it harm the players in any way? DF has plenty of room for features. A lot of people play DF in an extremely destructive way already, and Toady accepts it.
Yes, but they play destructively *within* the limitations of their own power. In effect what you propose is more akin to giving people cheat-codes to cause mayhem, that allowing them simply to cause mayhem. If I can simply change character strategically, then it is no longer about playing a series of characters and more about being an invincible demonic spirit that cannot be exorcised or warded against.
To sort-of return to topic, if it takes a long time to rise to power and a lot of effort, then we lose something if we for instance decide to start a suicidal war. If we can simply possess an already powerful person, then nothing is lost if we lead them to ruin because we just jump to the next powerful person. In effect you get given the political power to create mayhem and we can lose it, so we have an incentive not to create mayhem just because we feel bored.
Plus there is the hybrid situation where if I lose I can possess characters in order to bring them to ruin, so as to allow me to escape from the consequences of my diplomatic mistakes in the actual game. That makes your proposal also basically akin to adding reloading into the game; I win I win, if I lose I possess the hostile leader and have my enemies self-destruct.