The fewer miners there are, the easier it is to carry out a 51% attack. And the top miners have much more processing power than the average miner. Just a few of the top ones collaborating could carry it off.
That's definitely a problem, and it's the reason other projects are working on ASIC-resistant proof-of-work. I just don't see how the method I described would make things any worse.
Why not? Pools are still huge, and at least the "ethical" members of a pool could move their processing power to a different pool. If individuals are bigger than pools now, that means even fewer people have to collude to get 51%.