It has potential

1. They get discarded.

2. Yes, that would work (also worth noting that you could put fate on the conflict deck character when played from your hand too).

Odd one this, as on the turn it hits your dynasty slots you're down to a choice of three characters, then on the turn after you're up to a choice of five characters, presuming you have a character that has left play. Of course, on that first three character turn if you have no character that you'd want to play without fate (and no character that is queued to leave) then you're either faced with leaving it in place for another turn (and thus making it 3, 3, 5, which is 1 less character than you would have seen if it hadn't been in your deck) or discarding it, for 3, 4, 4, (which is still 1 less character).

In other words, if the card works, you gain no extra characters to choose from, if it fails you end up a character down. 

The ideal situation would be a Bayushi Liar flipping at the same time, playing it for 1, letting it die then move to the holding, and the next turn playing it again. Overall it'd be 2 fate and 2 slots for 2 turns of presence of a 1 coster, and +2 conflict cards.

However, because you can't engineer these ideal solutions, and because frankly every other holding we have access to is better, I consider this a trap card that just isn't worth playing.

While I don't think that the card is bad, I personally don't include it in my normal scorpion decks. Having one dynasty card less for one turn is a big downside and every holding I include makes the downside worse. That said the dropbear deck doesn't need dynasty slots that much and probably can slot in one or two for a better late game.

In essence, it allows us to keep an extra temporary hand made up of characters at the expense of a province slot. It's a trade-off I'm personally willing to make. Once characters are beginning to flock under it, it practically turns into card advantage.

Not sure what you mean by card advantage. As soon as you play one character from it, the holding sacrifices.

Fair point on mama dropbear, though in that circumstance I'd say it becomes as good as Imperial Storehouse, in that you're effectively trading a dynasty slot over for an additional conflict card. Of course actually, you're trading a dynasty slot for 2 turns for an extra conflict card, so it's slightly worse than Storehouse in that circumstance.

gamblingworld is right about the variability in quality in cards creating relative advantage, of course, but personally I'd observe that while quality of cards in the card pool varies a lot, quality of cards within a tuned deck varies a lot less.

I guess the other big benefit of the Hideaway is that the deployment happens at action speed, so can occur in any phase and at any time. That's useful in tempo terms on the following turn, as it saves a dynasty action, and it is nice to carry as a threat in conflicts.

Still, I'm not sold on this card though.