EDIT: I really like this one! Very flavorful! If I ever get around to running a homebrew world, I might do something like this too.
Glad you like it. Have fun with it.
For all of you who've said you use house rules for initiative: how are they working out for you? I'm not satisfied with the default method for initiative, as I find working out the initiative order grinds everything to a halt and can sometimes take the tension out of a pending combat. I imagine rerolling initiative - and thus have to reorder the list - every round would make that feeling even worse and thus slow the game down even more. And I'm not sure I like the idea of side initiative either, in which all of one side goes and then all of the other side (assuming they haven't been completely decimated before they even get a turn). I've tried just running freeform combats without rolling initiative but my players don't really like that. So yeah - I have yet to find a method of running turn-based combats that I actually like.
I've found it really isn't disruptive to the table or significant time consuming. There are only 3 possible outcomes. So once you've used them a few times, it's really very quick.
1. 50% of the time, I [the DM] will roll higher than the party.
[Oh, guess I should have noted that we use a d10 for initiative, also.]
But anyway, so when the DM is higher and no one with their modifiers beats my roll +modifiers, DM goes first, everyone else after. They can work out an order if they want or we just go around the table.
2. In the cases where the group rolls higher than the DM can get with mod's, they just go first...either in order that they basically know after a few combats (who has the highest dex? Who's the ranger/barbarian/elf/whatever with the keen senses? or whatever other mod's there might be) or I have never had a problem just going clockwise around the table.
Players' side won initiative. I don't care who goes when, because they're all going before any of their enemies.
3. Now, when you have those cases when a few modified rolls are better than the DM's roll and a few aren't...it is the players that beat it, then the DM, then whoever's left.
I mean, if you have piles and piles of modifiers that change a lot, it could be a real pain. But since these things basically stay the same: Player 1 knows they're always adding, say, +3 to the inish roll. Player 2 knows she gets +2 from some magic item. Player 3's halfling rogue is getting his +5. etc...
So, DM rolls 7. Player rolling for the group gets a 3. Everyone knows, in an instant, halfling rogue's going first, then DM, and player's 1 & 2 ("lost" initiative) go last.
It's really not as complicated as I'm making it sound. hahaha.