I don't know what could have possibly been more interesting than Bitcoin to move onto, but my favorite (conspiracy) theory is that he "moved on" to the development of Namecoin, the first real altcoin. Mind you there is no explicit evidence that satoshi was actually involved in the development of Namecoin, or that he and Vincent Durham (thought to be a pseudonym), the first developer of Namecoin, are the same person.
I think it would be possible for BitDNS to be a completely separate network and separate block chain, yet share CPU power with Bitcoin. The only overlap is to make it so miners can search for proof-of-work for both networks simultaneously.
The networks wouldn't need any coordination. Miners would subscribe to both networks in parallel. They would scan SHA such that if they get a hit, they potentially solve both at once. A solution may be for just one of the networks if one network has a lower difficulty.
In the same post, he described what "merged mining" would look like before it actually existed:
Instead of fragmentation, networks share and augment each other's total CPU power. This would solve the problem that if there are multiple networks, they are a danger to each other if the available CPU power gangs up on one. Instead, all networks in the world would share combined CPU power, increasing the total strength. It would make it easier for small networks to get started by tapping into a ready base of miners.