How do you isolate the sky on one of the layers?
This is the most difficult part, but it has no relevance in this question. It is sometimes painstaking, combining several methods, though there are cases, when it is quite simple.
What's the real purpose of the Lab conversion?
To be able to adjust the color and the lightness independently of each other. In RGB mode if you adjust the lightness, the color too changes.
Do you start your workflow from a raw file? If so you can create two versions, one having the sky the way you like it, the other everything else the way you like it, render each into Photoshop and blend them using a mask perhaps with a gradient, without converting to Lab
As I posted it, this is exactly what I am doing. However, it is difficult to judge the "ideal" lightness and tonality of the sky, while one does not see the other areas. Usually the sky is too bright with the "normal" lightness of the rest. When I reduce the lightness, the sky gets darker, usually more blue, but the rest becomes worthless, one does not see them "side by side".
Plus, color adjustment in ACR is by far not as clear as in Lab. In fact, it can be disastrous.
You can change the luminosity of a layer without affecting its colour by clipping a Curves Adjustsment layer to it in Luminosity blend mode
Yes, you can. That's "poor man's choise".
I think compared with trips to Lab these options may result in more non-destructive editing flexibility and smaller file size
There is nothing destructive in this setting (I don't lose any colors in the sky, at least I have never noticed that).
The file size has nothing to do with the subject, as I convert the sky back in RGB and insert it in the original image
in most cases.
I did not want to elaborate on this, because it really depends on the actual circumstances, but sometimes I keep everything in Lab (I archive the file this way), and I convert it in RGB only when creating a specific version for Web or for printing.
Anyway, the file size is not a consideration. My files are usually between 100 and 800 megabytes, a few more or less megabytes don't make any difference.
Finally, a note: the selective color adjustments of PS CS3 are really appealling
at first sight, but they can be devastating. They are no contest for Lab (I do use this feature often, but warily).