I agree with Mihai: Consistency is key here. Whenever you want to do something and the Windows API provides a solution for it, you should go with that. Because, once everyone does that, every application works the same which is good for general usability (lower learning curve).
Now I agree that shortening paths is something with a lower impact on usabliity than, say, file open dialogs, but aonsistency still is a nice thing to get.
And imagine Microsoft doing something fancy to that routine in the future (maybe a genious will find a whole new (and better) way for shortening paths or maybe windows will begin interpreting control sequences in character strings put to labels for example to display additonal UI (maybe a tooltip or something) so the whole path can be displayed after all (just speculating here. I’m not saying it’s an intelligent thing to do).
If you use this routine, you will automatically be able to take advantage of such changes.