Is this hidden-city ticketing with checked bags a big deal?

Whether you need to grab your bags during a layover varies a lot between airlines and airports. In the US, if you're on a single through ticket, you usually don't have to — but with separately booked tickets, you need to check the final destination on your bag tag yourself. Don't just assume your luggage will follow you.

The practice itself isn't necessarily a violation, but how responsibility would be divided if something actually went wrong is probably the more important thing to clarify.

To be on the safe side, you can ask at check-in whether your bag is checked through to your final destination or only to the transfer point, and take a photo of your baggage tag for your records. That said, this only works if you've allowed enough connection time and your flights are on the same booking or can be linked by the airline; otherwise, if the first leg is delayed, you may end up bearing the rebooking and baggage handling costs for the skipped segment yourself.