Also, just a heads-up:
If you enable this feature while rendering obsolete any older Item Types, the "Item Type" field in the Item Details screen of older Items will display its Code and not its Text values. Not to worry though if the Items are closed or in final state (and no longer require modification), as the Item Dashboard will still show textual values regardless of portfolio-specific settings. 
Crisis averted there.
True scenario:
I made this change fairly recently along with modifying Project Templates. The requirement was to change template/standard project structures, and I thought it best practice to retain and simply "Flag as Obsolete" any older templates. The major change in the template was that the the number of Phases in the new template are now less thanthe template to be retired. Some projects were already in-flight and we could not simply reuse the old Item Types (and modify their DPs) as while testing I found that the deleted DPs would:
- Display in the UI with their code values (like 'ZDP001')
- Disallow status updates, and
- Automatically set the "Active DP" flag for the deleted DP, within items with final DP set to final status. (i.e. project is ready to close)
The result was that Items couldn't be closed properly! Either way, the above approach caused data inconsistencies so it was unacceptable. Hence, this would be one practical reason to maintain portfolio-dependent item types
Solution:
Implement the following OSS Note:
Note 1953807 - Item Type ID is displayed in Item Overview
I hope this helps you get out of a pickle, before your users even get to that state.
- Lawrence