My Cordoba is a thin body flamenco shaped very much like that one (wonderfully rich and loud sound indeed, you should definitely make one). I love the feel of that smooth, wavy cutaway transition. I suppose it would be possible to do on a steel string, by leaving part of the head block exposed, and carving the transition after getting the neck attached in its final place. There would be some kind of a seam though, and the effect would be ruined if/when the neck ever needs reset.
So yeah, for steel string, I'd probably just go with the cutaway edge perfectly vertical, where it joins right at the edge of the fingerboard. I always thought the Taylor 1-2mm sticking out looked tacky, but trying to bend the side to follow the heel curve looks like more trouble than it's worth.
I like martinedwards' style too though, keeping the heel edges straight so it's a naturally smooth transition, with no crazy side bending. I don't like that big squarish heel, but that could be rounded off without affecting the transition.
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