Seems that the answer to the first part should be yes, but haven't seen any references or examples. E.g. suppose I want to hedge XLF position with FAZ. Do people use close to current returns, or just recent? What's the risk / cost of intraday rebalance?
First, XLF and FAZ do not track the same underlying benchmark.
Pretending their benchmarks were the same, you would theoretically have a dead on (3x) hedge intraday. However, at the close of each day, you would be out of hedge. As soon as the market closes you would need to sell a bit of FAZ if the market is up, and buy a bit of FAZ if the market is down.
It's important to understand the underlying process of leveraged ETF's, and their need to rehedge at the end of the day. There's many good articles on the subject, a quick look found one: http://math.nyu.edu/faculty/avellane/LETFRISKPROF.pdf