OP, can you post more information and what your opinion is on the proposal? That would help start the discussion.
1. Would this affect physical merchants who accept 0-confirmation, since transaction propagation will be longer and merchant/user might have wait a bit longer while there's queue?
Of course. It will affect the user too. I will not let the payer leave until I see one confirmation if I was the merchant. Hahaha.
2. Would this affect block size/weight limit size increase in future?
I believe yes, the same as ring signatures? Maybe DooMad can confirm.
3. Is using Tor/I2P/Kovri better/simpler solution?
Or take features that help in anonymous transactions in an off-chain solution that Bitcoin already has?