Swapping effects has a cost, but you can switch them out several times without much noticeable effect on a PC (xbox, I do not know).
There are ways around it though. You can keep the effect, but change the techniques. Or, you can create multiple passes within a technique, and rather than changing effects or techniques you just use a different pass on each model. You can also define an array of vertex and pixel shaders within one technique pass and select them with parameters passed at runtime (see the basiceffect shader in the education).
However, if you search the forum for this (don't know what terms to use.. effect & performance & change and use the advanced options & find those words in posts written by Shawn Hargreaves...) you will find reports that swapping out entire effects sometimes is more efficient than other methods. I believe some driver voodoo makes it hard to predict exactly.
Best,
Byron
..shaders make you feel... powerful, or very very stupid.
http://drjbn.spaces.live.com/