So I have this wicked nice, white FSA XLII Headset lying about, and I was thinking of putting it on my fixie when I build it. It’s 1 1/8" just like the frame, so fit isn't an issue, but I mean, it's a mountain headset. Do people do this sort of thing? Is it practical?

I do it! I have a 1" Tioga MTB headset on my single speed road bike. The stack hieght is about the same as a normal headset.
I think the only difference is in the shape (more rounded)
It a headset, why not use it?

I ran an old LX 1" headset on my Surly

Your headset can't smell the difference between a mountain and a non-mountain frame.

Race it in a downhill or cross-country occasionally just to be on the safe side.

Already owning the headset is about as practical as it gets.

Let it be Done!

Thanks guys