Replying from mobile, so no elaborate quoting.
On timing, I think it is true that you do not care about absolute time, you do care about approximate time of intervals however. With the transaction based timing mechanism you described I believe that block time would get shorter and shorter as the network was busier, not a steady flow. Setting and trying to maintain a regular block interval is important, IMHO, and should be a mechanism that is as far from being manipulated as possible.
The optimal timing probably depends on network characteristics and technology. It doesn't make much sense to fix a permanent timing in the protocol. At some point, if there is enough txn volume to pay for the bandwidth/storage and the scheduling technology is there, confirmations could be almost instantaneous.
For now, suppose we want to target a 10 iterations every 10 minutes. Just give clients the following instructions.
For every second (based on the client's private clock), push a txn to stir the pot with probability x, where x is some small number. If there are less then 5 iterations announced over the past 10 minutes, then increase x by 10%. If there are more than 15 iterations announced, then decrease x by 10%. If everyone does, this you will end up with about 1 iteration per minute. One individual could spend money to speed this up temporarily, but it won't help him in any significant way. Any small action, is countered by negative feedback. If the network is running smoothly, he is better off relying on others to do the work. Large actions are costly and infeasible unless you have a lot of coin.
I also think asking or encouraging folks to keep their coins online is a mistake. Even if everyone tries, there will be plenty of times that less than 50% of coins are offline, especially if folks want to protect them. So if the currency is successful the majority will disappear.
I don't agree with you at all here. The right approach is to make keeping coins online safe from significant theft. We need this anyways to solve the theft issues that plague bitcoin. How to do this is kind of orthogonal to the discussion here.
Briefly, it is not hard to implement limited keys that place periodic withdrawal limits on txns. This is what real-world banks do. These are the keys that need to be online. Keys that can do anything are like your ID and bank account book. You can keep those in a safe.
