We have used this system for years now, and it's great! We've used it for Europe several times, visiting family, WDW and a
Disney cruise.
When DD was younger, I packed a full outfit in each bag. For DH and myself, I'd pack the clothes by group: socks and underwear; t-shirts; long-sleeve shirts, etc. Now I've adapted her system to ours.
One of the benefits of this system, which I don't think others have raised yet, is that you can easily find something in a suitcase or duffel. You're not having to unpack and repack when someone says: "but I need that in my carry on!"
And also as to wrinkles, I've found that if you're a bit anal with the packing in the bag in the first place, there are next to none on the other end. All of DH's formal gear came out looking spiffy on the cruise, even though it had sat in the bag for more than 48 hours.
Once we come home, I empty everything beside the washer. And the bags go right back into the suitcases, ready for the next trip!