Yes it does work like that because there are bottlenecks as to how fast you can collect and add a tx. into a block. Its not 'instantaneous'.
And no, we would not only see empty blocks; Thats the whole thesis of game theory.
Also, if we would see empty blocks then, then why aren't we seeing empty blocks now? There is no requirement for the miners to fill the 1 MB block. They could leave it empty if they wanted. <-- *hint* They don't because of game theory.
Ok, I'll bite.
How long does it take for a tx to be collected and added into a block?
Do you have a time for this? Or for 10 tx let's say.
We don't see 0 blocks mainly because pools are not risking to be target for the public outrage and lose miners from a more than certain boycott.
Second, what are you trying to say with your example?
![Huh](https://bitcointalk.org/Smileys/default/huh.gif)
I just said it , you don't see 0 blocks because it gives you almost no advantage, you use the same argument to prove that size does matter?
What is this, contrareverseantireverseupdown strategy?