I do this a lot, except I call it forced DFCO. I can see no reason why it would damage a manual gearbox. All the gearbox 'knows' is it's decelerating, it doesn't matter if it's DFCO forced by the ECU or the driver. In fact it can be better for the driveline as it can eliminate that on/off jerking as the ECU switches fuel back on at low revs.
It's a useful technique if you drive as speeds below DFCO engagement. My car glides a long way (almost as long as if it were in neutral) this way because the engine is only turning over at idle. It keep the alt charging, brake vacuum and PS pressure up.
With my Kangoo fully loaded to about 4500lbs it's little 1.6 provides so little engine braking that there's no difference at all in the rate of deceleration when I finally push the clutch in (I even asked a passenger if they could tell). Normal DFCO switches the fuel back on at 1200rpm on most petrol cars, I can go all the way to 800 or less, before switching the ignition back on, or just dipping the clutch if I still need to stop.
I use GPS to track millage since any kind of EOC will throw that off anyway.
My only concern is that if you use this technique if you do it to too low RPM (below idle) the engine oil pump might not be supplying enough pressure.
I find it a useful technique, particularly for heavy cars with small engines.
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