Won't my program run much slower when compiled by djgpp, due to all those CPU cycles wasted in switches between protected- and real-mode?

The quality of code generated by gcc with optimization turned on (-O2 switch to the compiler) is generally at least as good as what you will get from top commercial products, like Borland, Microsoft and Watcom. Mode switches indeed have a certain performance hit, but in most programs it is negligibly small, because only DOS and BIOS services require such a switch, and most programs spend most of their time doing other things.