...So ... with increasing network hashrate, the difficulty goes up, and the payout goes up as well? Sounds like these two variables will cancel each other out. Why not just have a constant difficulty with no variables?
The thing is when big multipools start mining this, which they will. They will have more than half of the network getting majority of the payouts and making more coins to sell for themselves since they are upping the network hash. This is a cool concept but not for regular scrypt, if you lose miners then this coin becomes worthless.