Is is possible to dynamically include a component (using SDI) such that it gets rendered on head section of HTML? Does that cause any error, details on any such use case which anyone tried before will be of great help.
no, there's no issue by using SDI even if you apply it into an element which is located into the head.
Since SDI is just a way to skip the cache and make the build of the HTML at Apache level, if you apply an SDI the browser should receive the HTML as you will create it by you AEM directly. It's for this reason that you will not find issues into the usage of it.
Anyway, if you want to use it (as probably I think) in order to avoid the cache of a "menu" component, I can confirm you that I already applied it in this way without any kind of issues.