if you're comfortable and confident in it, go for it. i myself have not tried it. i feel like i do not have a firm enough body shape for anything light and airy or shapeless. i would guess it would be similar to a wrap dress, in how flattering it would be. as long as it isnt so huge that it looks like your sheets got tangled on you, it would probably be good.

the only real danger is if you use the sash or wide belt on a dress like this you might end up looking segmented like an ant. yes it will make your waist look tiny, but it'll make your butt/hips look GINOURMUS by comparison.
also, go for rich looking fabrics, and avoid anything that resembles a party tablecloth or a pre-teens bedspread. i think if you avoid those types of horrible stereotypical styles, it should look okay.
oh, and kaftans can be stylish, if you take the time to do your hair, put on complimenting jewlry, etc... its just that most women who wear those style dresses have either given up, or go WAY overboard (i saw a woman with really bad 80's makeup last week.. think mimi bobek)

my aunt has a leopard print kaftan that she wears over black leggings and a black tank top, and it is adorable. she is a big lady, and she manages the look without resembling a.. what.. a jellyfish? i cant think of a decent example.

Yeah, I like the idea of a hip wrap. That would look awesome. I think you can wear anything as long as you wear it with confidence and don't just wear it to hide yourself. Make it with some gorgeous fabrics and be sure to post pics when you're done!