Yes, that seems pretty sensible. The only thing that still concerns me (and is the impetus, I think, for the FAQ ruling) is that the existence of Small reach weapons in 3.5 means that, given the rules for wielding mis-sized weapons, Medium characters can gain reach with one-handed weapons by using Small weapons, but any Medium weapon that gives reach has to be used with two hands. A Medium character could, for example, dual-wield Small spiked chains, or use a Small guisarme and a spiked shield. That's probably not game-breaking, given the -2 attack penalty for a mis-sized weapon and the reduced damage of the Small versions of those weapons. But it is difficult to rationalize why nobody can make a Medium one-handed spiked chain with 5'/10' reach and 1d6 damage. (Not as hard as it is to rationalize why a Small spiked chain has only 5' reach in the hands of a Medium character, of course.) Was it really that unbalanced that Small characters couldn't use reach weapons (and had reduced missile weapon ranges) in 3.0? 
