It's a clever little trick that makes for an entertaining drama. But what makes the rendition in Mayabazar so fascinating is that it apparently features Guru Gopinath as the demon Bhasmasur and Guru Gopalakrishnan as Lord Shiva! Gopinath's costume is striking and his physicality, especially when he imitates the mohini's dance, is very funny.
Guru Gopinath was originally a Kathakali dancer who created the dance form "Kerala Natanam," a simplified and more accessible style of Kathakali with many innovations. He and American-born dancer Ragini Devi formed a touring duo that "was the first professional effort in India to popularize Kathakali outside its home state or setting." Guru Gopalakrishnan was one of Guru Gopinath's students and the "torch bearer" for popularizing the form even to today.
Apparently the "Mohini Bhasmasur" story is commonly enacted in dance dramas even today. I couldn't help but end with this humorous version from the 1974 Hindi movie Har Har Mahadev: