Well, this post is a bit late - but here's my opinion.
An intelligent magical item is certainly a viable option for an enjoyable and challenging player character.
Since most intelligent items don't advance in a character class (well, none really) a good way to offset this is to come up in advance with a list of powers that the item has, and will have once they are unlocked. New powers can be unlocked when the wielder hits a certain level, or when other criteria are met (it slays 100 orcs, travels across the deep seas, scores an instant kill on a hit, is underwater, is in the presence of a diety, its bearer is targeted with an "x" level spell, etc.)
It may also be a good idea to have an item that does not necessarily have to posses its wielder to move and can move about freely on its own accord - i.e. a pair of magical boots, a dancing sword, maybe even a figurine of wondrous power.
Keep in mind that not all gm's will be up to the task of having a player as an intelligent magical item in their campaigns, and some players may grow bored or be too challenged playing one.
Another fun idea would be to let the player live as the magical item for a time, and then perhaps send the PC's on a quest to find some artifact, machine, or powerful being that can transfer the soul of the character in the item back into its original body (once they have located and acquired the body - which could be a quest of its own) or into a different body.
Anyway, just some thoughts I had when seeing this thread. As always, have fun and above all else...
KEEP ROLLING 20's.