A creative idea, and some of Bayard's reasoning is fun to follow and interesting to read. He makes some interesting points about the timing of the publication of Hound and Conan Doyle's ambivalence about resurrecting Holmes (perhaps reading a bit too deeply into the author's psychological state while doing so), and muses on the power of fictional characters: can they at times "cross the gap," as it were, and become more than just words on a page? It's no accident, I expect, that the initial epigram is a quote from Jasper Fforde.
In offering a close reading of the Hound itself, Bayard relies too heavily on a French translation of the novel, in which the translator uses canine descriptors for Holmes (thus "his eyes shining brightly in the moonlight" from the original English becomes "his eyes gleamed like a wolf's" in the French translation). Thus, Bayard's use of the translation to make a point that Conan Doyle is connecting Holmes and the Hound doesn't quite hold up.
While Bayard's plausible case for a different killer with a carefully-honed agenda makes for provocative reading, it's no less circumstantial a case than Holmes' is against the canonical murderer. Nonetheless, if you like exploring alternative interpretations of literary events, this is a book worth picking up.