I think it'll work just fine. If the power wouldn't cause cylinder problems, neither will nitrous. Since it lowers IATs, it'll actually be better for engine temp than n/a temps at the same power level. You're right about the tranny, too. Just make sure your cooling system is up to par, and you should probably install a few bottles so you have more time to run the nitrous.
Don't bother with the alky/meth/water crap. It isn't necessary with nitrous, and is more typically used for boosted engines. You might pick up a little power, but it doesn't justify the investment as IATs will not be excessively high.
I don't understand why people think nitrous would blow your engine under sustained spray/load. Nitrous is just extra oxygen and lower IATs. You're still getting the power from the oxygen/gasoline combustion. Its not like there's anything corrosive or destructive about the substance itself. I don't see why you couldn't run a 100 or even 150 shot, but that would be a complete waste of nitrous and harder on the tranny temps if it isn't necessary.
I just think you'll make out cheaper and with less mainenance in the long-run if you stick to the basics: n/a buildup, blower, or turbo. I understand your reasoning though, and considering your goals, nitrous IMO will work absolutely fine with your engine an an affordable initial cost. After all of your switches, gauges, bottles, nitrous and a tune, I think you'll still be looking at the money you could've put into an n/a build equivalent to 50 extra hp. What would that be anyway, a set of headers, exhaust, pullies, and maybe a better intake? Don't fool yourself into thinking this is a $500 nitrous cheapie.
Like you said, all that engine should have is low-end. The 5.0's stock power peak was in that neighborhood (4300-4400). My guess is that there's really no reason to rev above 5000, and I wouldn't be surprised if the hp peak is even lower. A window switch at 3000 rpm would be plenty safe. I mean, at 3000 rpm, 5.0s take 150 shots... I'd guess that with a 50 shot, you'd be ok at even less.... say 2500...
I'm not really a nitrous guy. Have you considered posting this question in the forced induction forum?