Just an idea regarding incentives:

A miner who wants to mine a block larger than 1MB needs to give up a part of the block reward. That way there is a strong incentive not to break the 1MB limit unless there are enough TX available which make up for the lost part (and the higher orphan risk) in fees.

Of course the actual numbers need to be determined with great care.

I would guess that even if this would be introduced today with conservative numbers, it wouldn't be used much to mint larger blocks until several block reward halvings have passed, or TX volume picks up a lot. Also by reducing block rewards this does lower the theoretical maximum of 21M, unless further measures are taken. And there will have to be an upper limit for the time when block rewards reach zero.

Has anyone ever thought about such a system?

-coinft