Allowing users to change the N value themselves is a terrible idea for pool operators. Anyone implementing this please let me know though
It won't be too bad if some limitations are imposed, e.g. X must be between 0.1 and 10, and can be changed only once per day. I want to say "and only after the account has already submitted some number of shares", but that may be too inconvenient for honest newcomers.
However, if implemented incorrectly, it is possible to hop based on imminent difficulty changes.
I wonder what the real world implications of this are - roughly: A 10 GH/s user that has an expected reward of 10 BTC can get an extra 0.2 BTC based on the difficulty decreasing 2% ?
Basically yes. If N is a fixed number of shares, D1 is the current difficulty, D2 is the future difficulty, p1=1/D1 and p2=1/D2, then the expectation for a share submitted just before the difficulty change is p2B where the fair reward is p1B, an increase by a factor of D1/D2. For a share submitted N shares before the difficulty change, the fair reward p1B is obtained. For the in-between period it increases linearly from p1B to p2B, so the total extra that could be obtained (with enough hashrate) is (p2-p1)NB/2 per difficulty change. Of course, to exploit it will require a reasonably accurate estimate of the time of difficulty adjustment, which is easier to do if the hashrate of the pool (including hoppers) is small.