It should be possible to use cascading protection with non-"sysop" protection level. Right now there's a hard-coded check in WikiPage that prevents that, as (quoting a comment above it) "[o]therwise, people who cannot normally protect can "protect" pages via transclusion".
While this is a good point, it is really a policy issue rather than code one in some cases. And if this is a concern, we could have a global named, say, $wgCascadingProtectionLevels that would default to array('protect', 'sysop').
For example, I think that it really should be possible for the 'editor' protection level that's currently enabled on pl.wiki (bug 46990) (there's a similar one on pt.wiki, see bug 39652). This is a FlaggedRevs-related permission (able to mark pages as "checked") automatically granted to semi-trusted users.
The practical use case: we want to lower the protection level of the main page of the Polish Wikipedia to 'editor' while keeping the cascading behavior. Protecting all of the subpages manually is unfeasible, as these are automatically cycled every day, and should be fully editable while not displayed on the main page.