This is really the only sane way to do it. I have run into some wonkyness with the commit history of the target branch commits not resembling git log, but that's usually for commits outside of what I'm trying to merge.

Edit: squashing commits down this way also helps reduce problems with replaying commit history on the actual rebase. In most cases you don't need all your "microcommits" in the history, and fewer commits just takes less time to reconcile.