A short sale is a reasonable way to purchase a home in this area. Keep in mind, any deal can fall through for a number of reasons. A short sale just has a few MORE ways it can fall through. I think the failure rate is about 70%, right now.
Short sales are getting more and more predictable. Most agents who have worked on short sales may have quite a few under their belt. Their offices may have dozens, or more. The collective knowlege base of these experiences has helped get many deals completed. However, there is not telling what the lenders involved in the sale will do.
As far as the offer, you should be prepared to pay market price for the home. You may make a lower offer, but when the lender who is losing out on this deal gets around to looking at the deal, they will most likely ask you to pay more, if your offer is too low. You can then bargain with the lender to get to a final price you can all live with.
Should you prepare an offer? I'd say, "Yes" if this is the right house for you, it may be the only way yyou can own it..