I2C pins need to be open drain using pull-ups which usually is not maintained by a simple level shifter. Have a look into the pioneer board schematics how it is solved for different supply voltages. I would suggest you to stay with SIO at 5V.
Thanks Bob and VisonZ. Bob I see I did not explain the use of the LTC4309 correctly. Although it can be used as a level shifter, it also provides bus isolation and several other features. it is designed specifically for I2C usage. Thus my usage is to provide hot swap capability to protect the PSoC processor from possible voltage spikes when users connect or disconnect the bus. My question is whether also using it as a level shifter is desirable. In the one case the SIO inputs receive 5 volt pulses and their internal comparators (essentially) convert them to 3 volts internally, and in the other case I apply 3 volts directly, I am not sure if one method is better than the other.
VisonZ, I was interested when you showed the tip with a Hot Swap option. But that option is not available for the Version 2.20 pins that I have.
So my question is unanswered. I will go without the level shifting if I do not get a more definitive answer here.