I like the idea, but it seems very OP to me.  If it is possible to alter the game mechanic, I would like to offer a compromise.

In most games with sneaking elements, armor adversely affects one’s ability to sneak.  Perhaps the name tag could be removed, but the armor is still visible.  This way, players can forgo their armor to spy, but invisibility potions do not cause a player to be effectively invincible.