from my understanding, if you turn into a fiend and then use shades to create a clone, the clone would then be a clone of the fiend you were currently morphed into, correct? so in this case: a blood bag imp that could change form to appear as a medium creature.
when fiend form ends on the primary caster, he reverts to his original form, but the clone is still an imp, right? if this is all true, then why would the imp have the spellcasting abilities and items of the original caster? basically, would the fiend clone have your class levels, or would it just be a fiend with it's own abilities and nothing more?
i keep rereading the spell descriptions because this sounds like an awesome tactic but i can't find any wording that indicates the clones would possess the spells and items of the caster. maybe one of you guys can point it out to me?
EDIT:ok, so i reread alter self. it says, among other things, that:
"You retain any spellcasting ability you had in your original form, but the new form must be able to speak intelligibly (that is, speak a language) to use verbal components and must have limbs capable of fine manipulation to use somatic or material components."
i'm guessing that this the rationale for why the clones would possess the class levels/spellcasting of the primary spellcaster? if so, it seems like a decent argument, but one that i think few DMs would accept for balance reasons. you're effectively raising your ECL temporarily, then cloning yourself which produces a permanent clone that is way more powerful than yourself. and it's easily repeatable, leading to some really crazy situations.
if your DM allows it, then that's awesome and you should abuse it to the hilt, because the spell descriptions seem to back up your interpretation, but i don't know too many guys that wouldn't ban this particular use right out of the box.
also, i still can't see where this technique would allow you to dupe your items.