Well, it should work but apparently in some cases it doesn't. At least it did not work for me on the last two occasions when travelling DUB->LGW->KRK. Both times the sector DUB->LGW was late in the evening, the LGW->KRK sector early in the morning. Baggage checked in and tagged at DUB all the way to Krakow. Both boarding passes issued at DUB.

Results:
1) Dec 04: baggage left at LGW, delivered two days later. Probably the baggage was actually offloaded the plane to KRK. The captain said about two passengers who had not come to the gate so their baggages had to be offloaded. There was only one empty seat so I guess they might have been offloading mine. It took more than one hour, apparently they could not locate the baggage to offload. No problems earlier at the gate, and the miles were added to the account without any delay.

Noticed later that my boarding pass for DUB->LGW sector had PCS=1, while the LGW->KRK PCS=0.

2) Mar 05: noticed that again PCS=0 on boarding pass for LGW->KRK sector. Trying to avoid the problems from previous time, I asked at LGW ticket desk after arrival. Indeed, in the computer system my baggage again was not marked as "put on the plane to KRK". The agent at the desk said "Good that you have asked - otherwise the baggage would stay at LGW". Apparently the system at Dublin airport is incompatible with BA system He corrected the setting and the baggage reached Krakow on the same plane as I did. No problems (on both occasions) on return trips.