Can't we just make it quicker and reduce the rewards appropriately?
You can, P2Pool did just that, they reduced it 20 times, reaching 30 seconds per block.
Do you mean P2Pool the decentralized mininig pool? If so, i'm sure it refer to how often the "share" is updated.
I'm a bit confused about that as well. If it chooses a 30s 'block time', that's just the speed of the
share chain. It obviously needs to have a difficulty that is much lower than the actual blockchain diff so that miners can regularly submit valid shares.
This doesn't mean that a valid extension of the actual blockchain is found much more quickly, it just means that n'*20=n. Stale blocks aren't a big problem in such a share chain.