I've been using the FastATA MKIII for many years now along with the SubWay USB device, all I can say is I would NEVER go back to using an Amiga without them...
To answer some of your questions...
Yes you have to remove the shielding (but I do this in all me A1200's anyway) however even then fitting it in an original "wedge" desktop A1200 can be a very tight fit especially when lowering the keyboard back into place. I really think it's best used in a towered A1200 like I use...
Even on a stock 020 A1200 HD read/write access should be at least twice the speed of the motherboard IDE header, on an 030 A1200 expect at least 5.6MB/s transfer speeds at PIO4...
Yes it can easily support very large HD's... I've been using two 500GB HD's (even tested it with a 1TB SATA HD) and two CD/DVD ReWriters on these boards for many years now and never lost one partition let alone a bit of data...
Can't answer the question "does it disable the existing motherboard IDE header" as I've never really tested it, not sure why you would want to use the motherboard IDE header when you have four high speed connections on the FastATA anyway...
Like I say the FastATA is in my opinion one of the best pieces of kit you can ever add to an A1200, the only difference between the MKIII & MIV as far as I can tell is, even faster read/write speeds and PIO5 is now stable...
Should you sell it... NO... give it a try first and see the difference it makes for yourself, fast disk speeds, CD/DVD burning, easy to add very large HD's...
Too many questions... nah... not enough...