The effect looks really great when getting close to the original shape, not that much when it is close to a rectangle. Ideally the blender effect should be combined with manually drawn pixels so the character properly fades away.
Yea the first few frames look kind of lousy. There are a few ways I could mitigate it, including what you mentioned. But this was just a quick 10-minute set up animation I did as an experiment, didn't really fine tune it.