This was brought up on the radio when I lived in San Diego after the first draft with Harbaugh as the HC for the 49ers
Long story short: Sherm went from being a WR at the top of the depth charts to the bottom because of some altercation between Sherman and Harbaugh. Source said this basically had nearly everything to do with Harbaugh (shocking, I know). He then initiated the idea at moving to CB because he didn't want to be mistreated and be on the bench rather than starting.
I don't remember the source. It was before Sherman blew up and he was not Seattle based, so it was no biased at all. Well, unless he doesn't like Harbaugh I guess.
They then went on to interview a kid that played for Harbaugh from the University of San Diego. He said he was a great coach and not surprised he got the job for Stanford and then for San Fransisco, but that he was a complete asshole and a lot of players did not really like him. He went on to talk about his competitiveness, ego, etc... Just thought I would throw this in
He gave it a shot and was obviously a stud CB as well.