The problems with this approach (if i understand correctly)
1. You still have to send bitcoins to this "M of N" address and so you still have to wait while this transaction get 6 confirmations.
No. Imagine that it is like sending bunch of bitcoin to an "M of N address" before the actual tx. To perform actual tx, your and some trusted parties private keys are needed. So you make tx with specified output at will. Because a merchant trusts those parties won't make double spend, he doesn't need to wait for confirmation.
2. What is incentive for the trusted auditors? You could send fees as an output in transaction, and if they see that tx includes fee they provide a signature, but tx would be huge, compared to standard tx
That depends on the number of trusted parties. And it wouldn't need to be that big in most situations. Furthermore some auditors pools may emerge, so the fee would have one output.
3. What to do in case of auditor closing its service, well, there is small chance that all auditors shutdown their services at once, but if you send bitcoins to this address and then want to use it after 2 years you may, to your surprise, find that these auditors don't exists anymore.
That is why we need a change in the protocol suggested by falschgeld .