[dasht]

"A system which relies on DNS, but in which anyone can setup a node seems better than a system that relies on DNS but only has one centralized node (Twitter), no?"

The concern here is that whoever is currently leasing the domain name has authority over users' identities. A better system would let users own their identities outright.

"In a truly decentralized system, you're not going to be able to have readable unique names without collisions. Why? [....]"

This is a well explored topic. A good place to start might be to look up "Zooko's Triangle" and then go forward from there towards various ways people have figured out to deal with such problems. (Zooko's wasn't the last word.)