I THINK it will still work.
After flashing factory image, everything in /system (ROM) and /boot (kernel) are gone and replaced by factory image. The new factory image will work perfectly even if /data is totally empty.
So, if we keep the /data (remove the -w para), all your app and setting should still work. In fact, don't even need to clear cache since first time boot, Lollipop will convert all into ART.
If you have App that depend on PA ROM, that app will fail. in that case, need to uninstall the app / change launcher, etc.
Recommended course of action:
The essential:
1. Backup whole phone (via TWRP/CWM/Android backup)
2. Store backup into PC
The experiment (now, don't mind if those goes crazy):
3. flash factory image and keep data
Phone should boot into lollipop normally with all data and settings.
Anything goes wrong, restore!
ps: never really try any custom ROM before, so, i cannot tell for certain

in theory, it will work! cheers
Thanks man, I'll tell my friend about it.
Oh ya anyone managed to get L Camera by PKMX working on nexus 4. On syko's Frank 9.1 it still cannot work, but I heard it is working in pure AOSP..