I hate to rain on the parade, but full blocks are an essential feature going into the future. Any proposal that tries to avoid ever having full blocks also must address how transaction fees are going to replace inflation as it diminishes.
If not, then there will be no funding for the highly redundant network that exists now, and it will necessarily atrophy to a handful of nodes; Being hardly less subject to coercion, malpractice, and discrimination than our financial system today.
This proposal does not negate full blocks. It has taken a demand driven approach. It is raising max cap only when more than 50% blocks are 90% full. It will decrease max cap if more then 90% blocks are less than 50% full. Hence the provision to collect Tx fee for each miner is always there. When it is increasing max cap because of full blocks, it means there are enough Tx in mempool to be cleared. When it is not there, we will see small blocks and max cap will automatically come down. Hence miners will never be starved off Tx fee.
The absolute best case scenario in this algorithm, from the perspective of fees, is that slightly less than 50% of the blocks are 100% full, and people are so impatient to get their transactions into those blocks that they will bid up the transaction fees up to about 50BTC in total. That way the network would be funded at about the same rate it is today when inflation (The subsidy) stops, ceteris paribus.
There is no prerequisite that coinbase+mining fee needs to equal 50 btc. I understand that you are trying not to disturb the miner's subsidy. But, you are wrong in assuming ceteris paribus. Other things will not remain the same. When the subsidy stops, the transaction volume will be far higher than it is today. So, with increased block size, a miner will be able to fill up a block with much more Tx than it is now and thereby collect much more Tx fee. Moreover, you are also assuming value of BTC will remain same. With increased adoption, that's going to change towards the higher side as well. Hence, if the toal collection of Tx fee is same or even lower than what it is today (which wont most likely be the case), the increased price of BTC will compensate the miners.
So, forcing end users to a bidding war to save miners is most likely not a solution we need to adopt.