I know I'm writing this WAY late, but anyway, I think I have something to share because I do play classical guitar on an acoustic steel-stringed instrument, and I have been doing routinely for years (to be honest, I haven't ever played classical pieces on a classical guitar!) — roughly 9 years of daily practice, to be more precise. I can play the staples of repertoire this way, like some of the Villa-Lobos studies or Torroba's Sonatina. It's definitely perfectly doable, and contrary to the other answers, I can say it does not hurt at all (after you overcome the initial inconveniences). There is also no sacrifice of speed (I'm definitely not the fastest player out there, but that's the matter of me not needing to play blazingly fast and hence not practicing, not of the steel strings).
And not only that, I would actually argue that using a steel-stringed guitar is better, for one simple reason: you can get far bigger dynamic range out of it. The classical guitar has pretty much only two dynamic levels: "quiet" and "even quieter". On the other hand, an acoustic steel-stringed instrument can be actually quite loud. In this regard, you only gain, because you can play arbitrarily softly on the steel-stringed guitar as well.
I use the steel-stringed guitar for everything, but it is especially fitting in some pieces. For instance, when I started playing Villa-Lobos, all the recordings of his pieces started to sound dull in comparison to what I can play myself on my guitar. I'd say that HVL in particular has to be played on steel strings, there's just the problem that nobody realizes that.
The price you have to pay is threefold:
- The tone is just sharper (I mean tone quality, not pitch). It is possible to get very mellow sounds out of the steel-stringed guitar (playing in high positions, on lower strings, plucking over the fretboard (sul tasto) and using flesh of your fingers (thumb, mostly) instead of nails — these all help with that and you can combine those), however in comparison it just will have a sharper tone. I have never found that to be a problem though.
- You might need to have good nails for this (I'm fortunate to have them durable enough). I also have longer nails than I think would be normal for classical guitar (I have them 6-7 mm long, i. e. something like a 1/4 inch). Various nail defects (little cracks, dents etc.) that negatively affect the tone will obviously be more common than with the classical guitar. (In my experience, if such a defect appears, you need to trim the nail immediately and quite aggressively; otherwise the cracks will spread, leading to far more damage.) I personally don't like when the flesh of the right hand fingers comes into contact with the strings too much, but your opinions may differ (and then you will need shorter nails but the playing will be a bit uncomfortable for some time). Even the most forceful rasgueados etc. are totally fine in my experience, and they do not hurt at all, but if you have shorter nails, it may be different; I don't know that.
- As mentioned in the previous answers, the left hand technique is a bit more difficult and the hand will need to get used to it. First, you need to push the strings with a little more force, second, it will hurt for some time, especially legatos and glissandos, and third, you will really need to make sure that in more complicated situations, your fingers are more or less perpendicular to the neck, because there is much less space. However, many people are playing acoustic steel-stringed guitars and they all made it somehow, so there is no reason why a classical guitarist shouldn't.
I hope that this helps someone despite the fact that I'm posting it 8 years late (!) :—).