We did this for our kitchen remodel. It was the right decision for us, but there are some caveats...
* Your loan payments include the interest you pay yourself, but unless you repurchase your shares at the same exact rate (which is almost impossible) your actual rate will vary. If the funds go up in price, you'll be earning less or losing money on the deal.
* If your employment is terminated by you or your employer, you must pay it back in full or any outstanding loan balance will be classified as a withdrawal and you'll be subject to income tax and penalties.
* Some plans allow for prepayment of the balance, and some do not. We wouldn't have done it if we couldn't pay it back as soon as construction was completed.
* In our plan some funds were excluded, so even if your plan allows loans you might currently be invested in funds that don't allow loans.