No negative effects on the transmission; learn rev matching to lengthen the life of the clutch.
At the very least, you need an MPGUINO or SuperMid for this. A Scangauge e, Torque Pro w/ ELM 327 , Ultragauge, and Scangauge II (order of preference low to high) are much better alternatives.
Yes, this will increase your fuel economy if you know what you are doing. Without instrumentation and practice, you can actually get worse fuel economy compared to steady state cruising.
When applied to its full potential, pulse and glide can nearly double your fuel economy, but remember that there is a learning curve involved to get there.