Hi Dan
There is only downside with not tying the hook on as it really serves no purpose otherwise.
The second hook is usually the most important, it takes the weight of the bait for casting and holds it in position. If not tied down a pilly or cut bait will try to double itself up making it spin in the water. Retrieving will do a similar thing to a live bait trying to double it up.
If you get baited the loose hook will also rub against the knot of the fixed hook and if the last hook is broken or bitten off you lose both hooks.
Not being tied also has the disadvantage of not allowing pressure to be applied till it comes against the other hook which would probably result in a number of missed bites and lost hookups from poor setting.
The loose hook would also be a danger to you as it slid back up the line landing a fish that gives a head shake sending it up the line and coming back down on your hand as you grab the fish.
It would work if you had say a pre made wire trace and were allowing it sit on the swivel, however you would still have the problem of it wearing through the knot. A way around that would be to work some plastic tubing over the knot to protect it.
Have a look in the saltwater forum, chris aka gwh posted a few pics of a sliding tailor rig he uses that would be a lot more suitable than fishing a loose hook in my opinion.