I disagree - I think the old system was quite fair.

Consider: the switcher decides to put half of the pool on tagcoin and half on litecoin.  The miners on tagcoin will see much higher reject rates then those mining litecoin.  Both are doing the same "real work" towards finding a block - but those rigs on tagcoin would be making a chunk less due to reject rate.  Essentially, half of the pool would see lower profits.  

Considering that we do not mine the smaller low-diff coins for very long, consider the more realistic situation where a chunk of the pool gets moved to tagcoin for a few shifts.  That chunk is basically being "penalized" by higher rejects for a few rounds - possibly several percent difference in an hour of mining.