I'm doing a transitional year now, so I'll share a few thoughts...
The biggest frustration is not having a "home" rotation; you're always the off-service intern. In a hospital where there are many different residency programs, that can mean that you can get screwed because programs will look after their own. It's usually not a huge deal; just things like you'll always get picked to take that one extra Saturday call, or you'll always pick up the first hit on call days. If it's anything more than that, then we can typically go to our director who fixes things.
Remember that all interns have a huge learning curve. So even if you're on service with medicine interns, they're not going to be light years ahead of you, at least not at first. Later on in the year, you'll be able to be a greater breadth of knowledge to your rotation. Like right now in the ED, I can tell my attending exactly what the pediatricians will want because I've been there. Whereas the medicine and surgery folks are mostly clueless.
Also, remember that not only are transitional internships are competitive, but so are the categorical residencies that people go on to complete. People recognize this, and they realize that even though you may be going into derm or rads, you had to be pretty darn good at everything else too.
Lastly, there's not a huge difference between many transitional years and medicine internships at a lot of places. Chances are that you'll get plenty of medicine under your belt. Actually, it'll almost certainly be enough that you'll cherish those electives and non-medicine rotations like they are gold.