only drawback being the possible issues with accuracy?
Not accuracy, it falls out of calibration as soon as you change position.
lets assume for a moment you place the camera on a tripod such that you can swivel left and right and tilt up and down but not move in any other direction. Now you calibrate this and if you were to play a game it would always shoot exactly where the camera was pointing.
Now you pick up that tri-pod and move it 6inches to the left, all of a sudden it's no longer calibrated and when you shoot at the left side the screen the shots will register too far right, and when you shoot at the right side of the screen the shots will register too far left.
The further left, right, up, down, toward, or away from the screen you hold the gun from the point in space where it was calibrated, the more "off" the calibration will get. Even moving your arm instead of only your wrist can change the position of the gun and throw it out of calibration.
It seems like this would work similar to a

Y gun setup - is that correct? Basically calibrate and move the cursor around based on the
You got it! That's exactly how it works. The gun games on Wii are ok because they place a cross-hair on screen, so you don't really care where the gun is actually pointed you just care where the cross-hair appears. Just like using a really elaborate mouse. Unfortunately most arcade games don't provide you with cross-hairs (unless it's a game designed for mounted guns) so you have to rely on where the gun is actually pointing.
So with the wiimote ccd part you place it in a gun shell of some kind and connect to this adapter and you have full gun compatibility with all JVS systems?
Not all JVS system, just those games that normally use the "OMZ" aka the "Sega Type II IR" gun setup (which is most NAOMI, Chihiro, and Lindbergh Games), or games are designed for analog mounted guns. there are many JVS games that wont work with this setup, and there are many non-JVS games that will. Honestly this really doesn't have anything to do with JVS, other than the fact that most light gun games happened to start using the OMZ gun hardware around the same time JVS started getting used.
do you still need any gun sensors
The camera in the gun is the sensor. It needs a couple of IR LEDs in order to track position such as those in the "Wii Sensor bar" (which is a total misnomer because it's nothing more than a plastic box with a couple of LEDs in it)