This.  Looking at the code, that's part of the reason hash rates are half of what normal scrypt coins get.  When the next Nfactor tick kicks in, hash rates will cut in half again.

Worse yet, when that next Nfactor tick hits, all of those currently working settings that everybody has optimized for all their cards will start killing cards like the normal scrypt settings are for the current Nfactor.

Sure, it's ASIC-proof, but it'll end up being GPU-proof in just a tick or two as well.