I live in the Woodland Heights and get up in that corner occasionally, so I may not the best person to give advice, but I have some opinions nevertheless. Is it a good area? Yes. Is it a great area? Not yet. Its still transitional and that is nothing to fear, but if you're in it for the long haul I don't think there's any question it will be a good investment. Some things in life you may want need instant gratification on, other things you may be willing to wait. It depends on where you are in life, but recognize, life events can change quickly and as such so do your needs. I don't believe that area is unsafe, but recognize its still inner city so crimes of opportunity can still dominate. And that's true everywhere. Shady Acres from my understanding of friends that live there has a pretty active neighborhood association and families are definitely moving in. I would also classify it as very friendly, and I think that's true because as a whole the Greater Heights is a very socially engaged neighborhood, from things like LITH, White Linen, First Saturday, to all the shops and pubs that embrace their neighbors. Its friendly because there are so many neat places one can walk or bike to, it encourages people to come out and be social. Which I assume would explain why you're looking in that area.
Schools are one thing that may not be where you want it to be. Not sure if you intend on having a family, but there is a price spike directly associated with school zones. If you see two homes across the street that otherwise look the same but are 15% different in price, take a look as the school zone boundary. Don't underestimate anticipating your future needs and getting into a good school zone. I was single when I moved to the Heights and now married with small kids, I can't tell you how important that is now.
Shady Acres has no shortage of neighborhood bars/pubs/hangouts. For non big-box retail you'll want to jump over to Heights proper I suspect. Shepherd/Durham corridor has begun its long overdue transition and will be interesting to see how it evolves over the next few years.
You're right about flood insurance. Its a must in that area. http://www.harriscountyfemt.org/.
Speaking from a totally and completely biased perspective, I would keep an eye on www.har.com and see what pops up within the Heights proper. Investment wise, at this point I see east of Shepherd outperforming west of Shepherd. If you can get in the area bounded by White Oak, 11th, Heights Blvd and I45 then at least for right now, you've got no worries about schools. Other elementary schools in the area are stepping it up immensely, so they're on their way up. Of course the Heights proper has now reached a price point that makes Shady Acres infinitely more attractive to young couples, but with higher price that come parks, recreation, amenities, and a lifestyle that is very unique and will always be distinctly different than Shady Acres.
Oh, and regardless, I would make sure you have flat tire insurance. I've had two nails in my tires already this year and my friend that lives up there has had 4. Construction woes.