Since 2007 I have been experimenting with playing classical guitar on a steel-string guitar. Below are my observations and insights so far. I am referring to steel strings starting at .012 inch for the first string on a flat-top steel-string guitar of high quality with a neck almost as wide as a classical guitar neck. When comparing with nylon strings, I refer to normal tension strings on a high-quality classical guitar. D'Addario strings are used on both guitars, respectively Phosphor Bronze Wound and Pro Arté. Both guitars have a spruce top.
Nails suffer more from steel strings than from nylon strings, and the risk of tearing a nail is greater. After tearing a nail, it may take up to a month before that nail has its original size and shape and is fully usable for playing again. To prevent tearing, my experience is that nails need to be kept a little bit shorter with steel strings than with nylon strings, and need to be polished more often. If one keeps up that regime, daily playing on steel strings is possible without nail problems.
Steel strings sound clearer and much thinner in the trebles, but less overtone-rich (duller) in the basses than do nylon strings. More overtones in the bass strings can be provoked by aggressive playing techniques and playing closer to the bridge, but this takes harder work than with nylon strings. Actually, a pick (plectrum) brings better sound out of both the treble and bass steel strings than do nails, but classical guitar playing is normally done with the finger nails because of its polyphonic nature and rhythmic independence of voices, which can not be obtained with a pick.
I have tried finger plectrums, thinking they would sound better than finger nails, but gave up very quickly because of the consequences for the right hand coordination.
The attack (the moment of hitting the string), surprisingly, is less loud with steel strings than with nylon strings. As a result, the apparent volume of a steel-string guitar is lower at the moment of the attack.
Steel strings ring through much longer than do nylon strings. As a result, the sound volume of steel strings in the moments following the attack is louder. In music where the strings are allowed to ring through long enough to benefit from the extra sustain, the volume of a steel-string will be louder much of the time than that of a nylon-string guitar.
It can be said that a classical guitar has a percussive character (dies away rapidly after a loud attack) while a steel-string guitar is more melodic in nature (softer attack with more sustain).
The higher tension of steel strings makes the execution of vibrato harder to impossible, especially on the bass strings, which tend to sound rather stiff, stable, inert, due to the absence of vibrato there. To be clear, vibrato is very well possible on the much thinner steel strings used in rock music on electric guitars, but on an acoustic steel-string guitar you need heavier strings to make it sound, and thus lose much of the vibrato.
Wound steel strings produce much unwanted noise when sliding a finger over them, and the third string is wound in a set of this gauge, so that only two strings remain that allow glissando. The wound third string has a much better, firmer sound though than a plain string, which is especially advantageous in polyphony and in chord playing.
As an aside, both glissando and vibrato are well possible on wound steel strings by using a slide (bottleneck) but that is unusual in classical guitar playing.
Chords, or harmonies of any kind, sound much better on steel strings than on nylon. This may have to with (1) the better sustain, (2) the thinner sound of the trebles, which fits better in harmonies, (3) the lack of vibrato, so the more stable pitch, and (4) the wound third string.
Music styles and playing styles that sound good on steel strings include polyphony (ricercars, phantasies, fugues), Renaissance and baroque lute music, jazz soloing, blues, rock, and chord playing either strummed or arpeggio. Reasons why Renaissance and baroque music, and especially polyphony, sound good on steel strings may be the clarity and transparency of the sound, the long sustain, the near absence of vibrato, and the wound third string. All of that is good for polyphony and contributes to an objective sound wherein the voices can be distinguished and each note actually rings through to the next one, contrary to nylon strings where a note dies away long before the next one is played.
Romantic music for classical guitar (19th century and further) is not ideal for steel strings, probably because of the lack of vibrato and warmth, and the limited possibilities for glissando.
Single-note melodic playing on steel strings may sound good, but is best done with a pick rather than finger nails. With a pick, it is much easier to bring out the best obtainable sound of steel strings. The pick needs to be polished often, just as with nails. It functions as a very thick nail.
Most steel-string guitars have a much narrower neck than do nylon-string classical guitars, and this makes classical guitar playing awkward or impossible because the strings are too close together. To play classical guitar on a steel-string, you have to look for a rare model with a neck width similar to the classical neck (at least 48 mm at the nut) or have one custom-built.
Another difference is that on most steel-strings, the neck joins the body at the 14th fret, while on classical guitars this is the 12th fret normally. This is beneficial for playing in high positions but may take some getting used to.
Steel strings last longer than nylon strings. New steel strings also retain their pitch very well right after being mounted on the guitar, while with new nylon strings you are tuning uninterruptedly for the first few weeks because they go down at once after tuning.
The higher tension of steel strings makes playing harder for the left hand, and in some passages you may have to change the fingering or remove an occasional note from a chord to make it playable. Such adaptations tend to sound well though, sometimes even better than the original.