They want to make it impossible to block other machines by address? Including ones that are attacking you? That's a horrible idea.

Also, this sounds like it will require way too much intelligence in the network itself. The Internet works because the big trunk routers do very little processing per packet—just look at the destination address, decrement TTL, and send the packet to the next router. If trunk routers have to do a lot of per-packet processing or keep track of every single node on the network, they'll fall over very quickly.