As topic says - are the both approaches fully equivalent, other than possibly performance?

If I remember correctly, Umbraco works 100% on both sqlite and sql server. You might find that if you use custom tables and custom queries that some things work slightly different though.

As hinted at, no functionality in Umbraco should be lost (though some packages might not have sqlite support). And indeed MS SQL has a lot of features that SQLite doesn't have. Also note we don't recommend it for production sites.