I played Hexxit, and you could get smelting tools on there. It made getting netherbricks moronically easy since you insta-mined them and I barely used furnaces at all since I would get way more from a Fortune III / auto-smelt pick.
I would be okay with this if it was a Treasure enchantment. That would keep it rare enough to stop Furnaces from quickly becoming obsolete once you unlock enchanting. Probably a good idea to make it not work with Fortune or Silk Touch too.
Even if it was just a rare enchantment it wouldn't obsolete Furnaces for me since mining Coal and smelting/cooking offers a nice little sum of XP. I don't fully automate my Furnaces or use fire enchantments when killing animals for food for the same reason.
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I don't see it making furnaces obsolete, just slightly less useful. I would probably make it a treasure or trade enchantment. Of course it would not be possible to use with Fortune or Silk Touch, that would make no sense.
Also when you first start the game you'll still need a furnace. Making it a treasure enchant won't change much since most players afk fish now, unless you make it so rare that it's like the Notch Apple.
Anyways destroy your old furnaces and make furnace minecarts :P.
My main reasoning for this suggestion is to make sponges easier to use.
Cough leather, wood, and gold equipment cough most foods cough
Smeltable foods can be cooked using Fire Aspect, or in the case of potatoes using the OP's suggestion. Gold I admittedly forgot about, wood would also be smelted with the OP's suggestion, and leather can't be smelted at all.
I do agree with Badprenup that making it a treasure enchantment and incompatible with Silk Touch/Fortune would be a good way to balance it out.
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Another way to balance this out is to make it only work on iron and gold ore, making mining them easier (I'd use this myself since I would not have to make stops to set up furnaces to smelt them so I can make more room by crafting them into blocks, as you can do with everything else), but not on everything else that can be smelted or cooked, just as Fire Aspect (technically, fire) does not work on all mob drops, and stone can already be directly harvested with Silk Touch.
There is also the question of whether it should be compatible with Fortune, although considering that all other ores are affected by Fortune it doesn't seem that unbalanced (iron and gold are also the easiest resources to farm). It could even give XP while mining, just as other ores do unless mined with Silk Touch (even if you don't lose the ability to get XP you do lose the ability to store it, as otherwise you can smelt it later when you can more effectively fill your XP bar/repair Mending items).
Silk Touch would have to be incompatible since only one enchantment can properly work at a time (either you get the ore, as without Smelting, or Smelting overrides Silk Touch, making this an odd case considering that Silk Touch even overrides Fortune if you use commands to place both of them on a tool). This means that you'd need two tools if you wanted to directly harvest stone and smelt iron and gold (which would generally be the case anyway if you use Fortune).
I wouldn't have it give any XP while mining, also a down side to this is redstone and lapis would only drop 1 when using this such as if you smelt those items. Clay would give terracotta and netherrack would give nether brick.
But what I like about this idea is mainly the 2 items that would help speed up building, the sponge and sand/glass. Think how much running back and forth you do when clearing large amounts of water. If you are draining a water Temple you will likely run back and forth clearing each room and drying your sponges.