The payouts would only be fair if everyone had a very similar hashrate
How do you figure? It would be fair to every single miner. It could even use pure PPS. You pick a percentage, X. If you mine a block, you get X% of the block reward less the pool fee. For each share, you get (100-X)% of the PPS rate less the pool fee.
and variance would be huge. Miners don't like variance.
Variance would be precisely as high or as low as you want it to be. Set X to 0 and you get perfect PPS with no variance at all. Set X to 100% and you get the same variance as solo mining. You get to choose exactly how much variance you want.
Precisely.
This hybrid model would probably appeal to the solo miner who currently gets nil income and is holding out for the 1 in 622 million (!) chance. He gets a trickle of income which is a share of the residual (say 33%) 25BTC+ reward after the lottery-winning miner has been paid.
The higher hashrate miner knows that the chances that he gets to solve the block are much higher, so his loss of the steady trickly income is offset by his higher probability of getting 2/3 of the reward.