FWIW - I’ve started using this approach about 2 seasons ago and have found it to be my preferred approach.
I started off using yarn and tying the pieces with thread at home but found that the wool floats longer, doesn’t need to be tied in advance - or at all, and holds more weight than yarn, which translates into a smaller amount of material flowing on the water that is more sensitive. I’ve also played with the New Zealand strike indicator which is the same thing, except using really small tubing instead of a rubber band.
Neither option left kinks in the leader or tippet and I have used them on 5X tippet. With tippet that thin, using New Zealand tool and tube is easier to setup than the rubber band.
I have been amazed at how much weight a small amount of wool will suspend. The only issue I’ve had is that too many larger trout come up and take the white wool and carry off the rest of the rig.