After some consideration I have decided to replace proof-of-work all together and use transaction fees to regulate block production. A new block is produced once enough transaction fees have been accumulated. The node that generates the transaction with sufficient fees broadcasts it. Ultimately all that matters is that the network reaches consensus and orphans are no issue. Nodes in the network can even stop propagating new blocks for a couple of minutes after the previous block. If transactions are coming to quickly I simply up the transaction fee like you would adjust the difficulty in BTC. These fees are then destroyed to pay dividends rather than paid to a miner.
As a result it doesn't matter how much hash power you have because you must *pay* to submit a block and the best-fit block is the one with the most coin-days destroyed so even if you pay to submit a block with no transactions, it will be rejected.
If the node that will transmit the winning block get zero rewards for doing so then it will need to be virtually cost-less to create and send it. But if it is cost-less then every node in existence if acting in good-faith and trying to support the system will try to transmit a block virtually simultaneously as the transaction list reaches the threshold. Mass chain forking will result as every competing block will be equally valid as they contain the full transaction list. I think in focusing only on blocking an attacker you've rendered the honest network unable to reach a consensus.
Some methodology of 'culling' the honest nodes willingness or ability to create a block is needed so they don't all try to transmit a thousand competing blocks. It may be some kind of semi-random selection rather then a PoW solution, and it needs to be adjustable such that this culling factor can adjust to keep block times stable. I would NOT try to adjust transaction fees, that's a commerce killer and a terrible idea.
Lastly, what are these dividends (from transaction fees) you speak of and who are they being paid too? If your paying them to the node that creates the winning block then you DO have a mining prize and standard BTC terminology would refer to your winning node as a miner, your just trying to skip to the end phase of BTC when it is 'transaction fee supported'.