yes it works... that's the way I do it. You need to make your color correction choices and do (or at least tweak) your composites, fades, and other transitions after switching to 32bit.
Yes that will work. But remember that the levels can change when going from 8-bit to 32-bit (and it depends what compositing gamma you use!). There are a number of conversions to watch out for... see my article: http://glennchan.info/articles/vegas/v8color/v8color.htm