I've never done it either, but I understand the problems are:

1. Steel is rougher on dies than brass.
2. The coatings used on steel cases (lacquer or polymer) for corrosion resistance and resistance to sticking in the chamber may not survive reloading very well.
3. Nearly all steel cases are berdan primed, so depriming is tricky and so is finding new primers.

I've been reading "ABC's of Reloading," and the author mentions that when fired, brass expands then contracts after the pressure drops. Steel expands but doesn't contract as much, and the coatings help to allow it to be extracted. apparently, resizing steel cases is tough, and the cases frequently crack or split when being resized.

A surprising amount of steel (and aluminum) cases are Boxer primed.

...snip for brevity...

2.  When I did fire them, better than half the necks split.

I was thinking to myself that annealing would allow for better survival rates amongst the reloads - I would expect that effectively the casings are being heat treated / hardened by the discharge of the round.

It would be an interesting experiment though - polish the casings, anneal to soften, reload (using gloves to keep skin oils from contaminating the casings), and then coat.  Assuming you could find a lacquer substitute similar to what they use to coat the finished casings...

Cost effective?  Can't imagine it - you'd probably burn up any "savings" in ammo costs with energy costs doing the heat treatment.

Hmmm.  We need to start an "urban legend" and get Myth Busters to test it....