Mechanics aside, there's probably a bit you could do to reduce the wording on the card; i.e.,
"casts a spell that targets a character" can be "targets a character with a spell" - see Dragonkin Sorcerer
"random" isn't necessary - when there's no feasible way for a spell to be 'chosen' then random is implied. I.e., Mad Scientist doesn't say "random secret from your deck" - just "secret."
"the same" -> "equal"
"mana cost" -> "Cost." Cost implies mana in hearthstone; health costs a la Flame Imp are just card effects.
With a little bit of shuffling the words around and some of the changes above, I got the same effect in four lines.
Mechanics - I don't really like the card - these sorts of things can wildly impact the game, i.e. transforming targeted removal into a buff (Siphon Soul into Blessing of Kings - whoops) - but I also don't know if I agree with some of your interpretations.
It feels like the second card should be cast regardless of 'targeting capabilities' - i.e., you cast the first spell (Siphon Soul) on Dr. Boom. You have "cast a spell that targets a character," and your opponent's mystic procs and transforms that spell into Shadow Word: Pain. Your spell still casts - the mystic wouldn't proc unless the spell had started casting, and transforming the spell implies it's the same spell that continues. Dr. Boom dies to the Shadow Word Pain.
(We know that Pain can destroy targets with more than 4 Attack - it's just a 'targeting' issue. You can Shadow Word: Pain a Burly Rockjaw Trogg - it goes up to a 5/5, and then dies to the Pain.)
For that reason, I don't know how I feel about the spells costing the new spell's mana; you spent the mana to cast the first spell, so this guy's refunding you your mana for some reason. I'd prefer it to just transform into same-cost cards instead of same-or-lesser. (The RNG on this is already pretty high, I don't think it needs to also have RNG power levels.)
Don't know if I agree with the "choose one" mechanic, either; you can right-click out of that screen to go back to your hand, which wouldn't work with this card. It would feel really weird, as a player, to suddenly get a choice you didn't want to make/didn't plan on making when playing a card - it's a bit different to just getting a different effect than you planned on. (One of my similar cards, in that it 'automatically' plays spells, just doesn't play choose-ones at all. Doesn't play Tracking, either, for similar purposes.)
Generally I don't really like the card, but there are some things about it I don't like a lot more than some other things and it could at least get better. I don't like that big, important cards can go really small and could even hurt you (Pyroblast -> Lay on Hands, oops) and I don't like that cards (especially big ones) can just straight up whiff (Pyroblast enemy face -> Mind Control, oops). A lot of deck types rely on spells to maintain board control in some way; I'm also concerned, then, that this minion might be too good at what it does (i.e., if it turns even one fireball into a... spell that doesn't do any damage at all, it's probably won the game. Doubly so if it turns a fireball into a kings).
