Sure, it may be kinda sorta like invisibilty-lite, except far less useful of course, in that the changeling can get away from pursuers once they're in the crowd. That's also if the changeling is running away by themselves, meaning either an almost TPK occurred or they went off on their own (which doesn't happen too often in PbP).
I don't see where this item ability would actually be used too much in PBP. It's more of a "solo adventure" item. Getting away during a TPK would be one use for it in PBP, but heading off on their own seems to be rare for PBP PCs. And even TPKs are pretty rare.
I also think that this is why the designers put very little of this into the game system. They want the players to overcome non-combat challenges via roleplaying and skill challenges (and in groups), not by just using a magic item to change the PC's clothing, the PC is now automatically disguised (with a Bluff bonus to boot), and the roleplaying aspect of it is mostly dropped on the floor.
What DM is going to say to a Changeling PC who can automatically totally change their clothes and appearance "Err, you don't get away in the crowd, the guards have spotted you."? The Changling ducks down an alleyway and he's suddenly someone else. Invisibility is extremely hard to acquire in the game system, but camouflage will work just as good probably 90% of the time.
There are very few powers and items in the game system that change the appearance of the PC. With all of the shapeshifting and illusional ways to do it in 3.5, I cannot imagine that this is by accident. I look at powers like the Wizard 6th Daily Disguise Self and say "Do we want to hand out a significant portion of the utility of this once per day power out to PCs to use at will without a real cost?".
Or replace the ability of the Mercurial Assassin? Or that of a Disincarnate?
In this case, the item appears to be either nearly totally useless (the situation doesn't call for it), or extremely useful (invisibility-lite). I don't prefer to encourage either direction.
I prefer for players that want it to put in an effort for it. For example, con 13 and str 13 and the chain armor feat with Imposter's Armor (or just an appropriate class) and the PC gets it. Or taking Mercurial Assassin. Or multi-classing into Wizard and getting the Disguise Self spell. Or getting a Hat of Disguise or buying Potions of Mimicry. The options for this are out there, they are just a bit rare and take some effort.
When the player has to go out of his way to gain an ability that is hard to acquire, then they will also go out of their way to find interesting ways to use it.
Handing out invisibility-lite (or major camouflage) for free with a single magic item rules change? Meh. I think rules changes should be for serious gaps in the rules like the Expertise for free house rule or house rules that will benefit a significant portion of the people playing here (like Improved Defenses for everyone, woo hoo!).