In this scheme, there will be only BTC buying with the fiat at exchanges. No BTC is sold to the market. Only scBTC is sold to the market but people believe the notion of the peg so they pay the same for them as they would for BTC (because after all they can be redeemed for BTC with only a 100 block delay in spend-ability).
Endgame is there are a lot of the scBTC created, reducing BTC liquidity and pumping the BTC fiat price... until it unwinds.
There is no peg.
There is no spoon.
Here is what I believe to be the flaw in your scenario :
If, as you say, people believe in the peg (which they absolutely should) then they will not buy your scBTC. In reality,
the market has no incentive to purchase your scBTC over BTC if they are the same price.
The reason for this? Well you have suggested it yourself : the "block delay in spend-ability". What makes the best money? The most cost effective and versatile exchangeable asset. BTC is more easily exchangeable with fiat (because of liquidity) and other scBTCs than scBTC is and is also more cost-effective at doing so. No matter the 1:1 fiat peg, BTC is a more desirable unit than scBTC. BTC has better fungibility and liquidity in the economy than scBTC.
Here is where you are flatly wrong. There clearly is an incentive, the time incentive.
To change BTC to scBTC, you will have to wait for 100 blocks or so, whatever the confirmation time may be.
If you buy them at exchange, there is no wait.
This confirmation exchange value is created in both ways in the transaction. People will pay a premium for time, localbitcoin pricing is evidence enough of this.
Maybe I'm wrong but don't the atomic swaps described in the paper remove "the time incentive"?