It all comes down to personal circumstances, for a single person living on their own, the difference between the Residential and Domestic rates might not be that much, not enough to want to risk your deposit even more. Although it depends how much your deposit is, €300 or €1500. But for a family of 4 or 5, it's essential to get the Residential rate, the price difference would be huge. I'm sure I heard a story a while ago of somebody who had overpaid by more than €2000 over the space of a few years, because they had a large family and were incorrectly on the Domestic rate.
If you only sign a 6-month contract and do go behind the landlord's back to sign Form H, the chances of being allowed to extend your contract would probably be significantly reduced too. Maybe another thing to consider.
It's a crazy situation, and sadly, probably one that hundreds of people have absolutely no idea about after arriving here. I've never heard of another country with a system like this.
The joys of living with a bunch of tax-dodgers!!