Or is the end (eventually) for the squatting game? When there are hundreds or thousands of alternatives for xyz.com, won't that seriously diminish the worth of any one in particular?
it is not a domain squatter's dream come true, it is the DNS bureaucracy cabal's dream come true.
It has little value for users/consumers (i.e., won't remember if they want canon.com or canon.canon). It has little value for businesses, because it means more time and money monitoring for domain squatting and trademark infringement. It provides yet another playing field for scammers and other predators.
The only benefit is to the upper levels in the DNS hiearchy, gives them more revenue to perpetuate themselves and to come up with more user-hostile ideas.
I agree, and as I said, it really doesn't matter. The vast majority of people are going to get what they need through Google, and to a lessor extent, the other search engines.