The reason Starfleet doesn't use it (besides and medical problems) is the same reason they do not equip ships with cloaking devices
They don't use cloaking devices because they're illegal under the Treaty of Algeron. The Defiant is an exception, and they were never concerned with the dubious morality with that (especially during war). Another exception would seem to be the personal cloaking suits seen in Insurrection which creates a similar effect to the one in question but without the risk of a minor injury becoming serious.
However, presumably they don't use these type of things more often is that most advanced races have devised effective countermeasures. The Ba'ku didn't notice the cloaking technology because they never bothered to scan for it, but I bet a Romulan would be able to detect it fairly easily. The "Wink of an eye" effect would simply be outdated by the 24th century - it wouldn't work anymore.