Pilot skill penalty is not a real problem in itself IMO. Of course, i find small cockpits perfectly acceptable as well. (What i don't like is compounding penalties, like having both torso cockpit and hardened armor like the Stalker II has. Either/or is fine, both not.)
But combined with the fact the torso cockpit weights more, is very dependent on sensors, and that through armor critical can now kill your pilot instantly (though headshots are actually more probable all in all), torso cockpits aren't great.
They work, certainly, i have no problems using a 'Mech with one, but frankly i don't see much point in modifying any 'Mech to have one.
If you build a 'Mech with torso cockpit, then you need to take advantage of the freed space in the head, and use it for ammo storage or a head turret. As ammo storage, the head is weird as ammo explosions in the head don't actually transfer anywhere (feedback happens still though), so you can save weight by not having any CASE systems onboard.