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I reckon the Shaggoth would work pretty well as a Daemon Prince, yeah. I believe the DP bases are 40mm (so Termie-sized) but many people use the Monstrous Creature 60mm base (Dreadnought-sized). Either would be fine, but I doubt a Shaggoth would fit on the smaller base. I'd say the 60mm base would be your best bet.
Yeah, I've seen a afew done and had a go at it myself. It works really well as either a DP or a greater deamon. The best one I've seen got the shaggoth dragon part with the CSM DP torso, head and arms and the Blood Thrister wings, Looked absolutly brutal when he had it all painted up.
Your definatly gonna need a dreadnought sized base but don't use the actual dread base, you'll need a flat one to make the shaggoth fit right