Paramutual betting (I think that is what it is called) isn't very popular in the bitcoin world. There is a site called OneHash that is similar to what you are describing (except for the "shares" for investing), and it doesn't get a lot of volume. Granted, the fees are a bit on the high end (5% of the pot), but I don't think slightly lowering fees would make a huge difference. Unless you have something new to bring to the table, it will probably be a waste of time, since most people like a fixed odds system.
That's good to know.
So if we were to take 1% and just have the smoothest thing out there, you still believe it will frowned upon?
Yes. The thing is, people don't like the thought that there bet on something that might have a really bad value. (example: picks the favorite, a lot of others also take the favorite, odds end up being @1.2, while another site will offer @1.3) Granted, you can get better odds sometimes, but people don't like the risk. You also won't attract whales/larger bettors because throwing 1 BTC into a match where only 0.1
BTC is placed on the other selection is stupid (unless the 1 BTC is bet on the favorite, and other sites give less than @1.1 (highly unlikely)). I personally wouldn't use it, and I'm betting most others won't. If you want to run a sportsbook, consider starting another exchange.