If it displays during the title entry process it is educating the users about the transformations that occur too. It's a positive-reinforcement loop that supplements the guidelines. It's the reason you don't have to document in the guidelines that the maximum title length is 80 characters.
The title processing logic is surprisingly complex, just as the whole issue of titles on HN is surprisingly complex. That means the code runs on the server, which would make it awkward to run during the data entry process, which of course is browser-side.
The best solution would of course be instantaneously with some javascript but if it's not CPU-taxing it would still be plenty fast to send the title to the server as the input value changes. It's not uncommon for forms to do this with username eligibility checks etc.
