You'll go absolutely mad trying to keep that sheet clean. Absolutely mad. Unless you're truly dedicated to having a non-disposable flooring, I sure wouldn't try to mess with that.
That said, it would WORK, it would just be a cleaning nightmare. Most us us change the paper towels twice a day when they're in use, and that's just that first week! The bigger they get, the more they crap!
I used the compressed wood pellets last year, covered with paper towels for the first week. They worked beautifully, even once the towels were taken up. All I had to do was stir them around. No smell, nothing. I still used them for the adults, but now, of course, since there's more droppings to deal with I scoop every day, just like a litter box.