I just set Plex back up in my environment after upgrading hardware and it is working fine just pointing the transcoding directory to /tmp. I think the key here is the amount of Memory you have available. From what I understand, Plex check to see if you have enough space in the /transcode directory to hold the entire file before play regardless if it is transcoding. So if your video file was 8GB, you need that much available in /tmp. I think the size of the /tmp location is defaulted to half of the the installed memory
I originally had only 16 GB of ram in my old server and I could only transcode tv shows while almost almost all my movies failed when transcode was set to /tmp. I now have 96 GB of ram (48 available in /tmp) so it has not had a problem transcoding anything.
So it's really dependent on your environment (dockers, vm's, memory installed) if it will work for you.
