Is Google Play Closed tracks for testing only?

I don't know of any documented limits to the number of devices installing an app from a track, that's perhaps something Lizzie will provide in the comment below, but on the face of it this doesn't sound like a bad approach.

If I had the option I'd still work from a unique package name. It's easy for a dev to generate this, and push it to play as a private app as the production version, using a closed track just for the testing before it's pushed to production.

That then aligns more closely with how Google expects these things to work, and avoids any potential issues with your flow in future (policies change...)