It would also be the only reasonable way to deal with multiple users on the same machine.

Files can be shared in a directory everyone has access to. On Unix-like system it doesn’t pose any problems (create a special group and assign permissions to it). I would suspect that on Windows you can do something similar (setting up a “D:” “drive”?).

Slowing things down... Logging in and out today is negligible in times of time spent. I’m not sure what other factors can come into play here for you in terms of a slow-down.

Having different OS users for different users seems to be a straightforward thing to do.