I've floated the idea around a few times on this board and a few others. There are always a few doomsayers that point out it will totally wreck melee combat, but I don't look at that as entirely a bad thing. It makes larger creatures much scarier, but that was 9/10's my reasoning behind adopting it. A housecat and a tarrasque shouldn't be making the same "minor adjustment" in movement.
The way I phrased it was creatures could take a "Single Step" equal to their Space, which you'll note is a lot like your method but it was easier for me to remember. I've only ran it in a couple of test combats, but I floated the idea past a couple of my regular players and they liked it so I might try it out in the next game I run.
Some notes. It does make larger combatants more deadly in melee combat, because they can move (slightly) farther and still full attack. You might want to bump the CR's a bit to reflect this. I was using +1 per Size Cat as a baseline, but you'll probably want to run that by someone who's better with CR's (I use it as a ballpark convenience). The spell Enlarge Person is more useful, so you might consider bumping it to 2nd level. Or, you can consider it a necessary tool in the Giant Killer's Bag o' Tricks, and leave it at level 1. (My inclination is to leave it at 1st level just so the extra move isn't a "monster only" advantage, but YMMV.)
I was looking at this as a way to make larger combatants scarier and more deadly, so I was planning on using less of them so that when they do show up, their presence is more dramatic. Kind of like the cave troll in LOTR. Its a way to make larger monsters scarier without necessaruly bumping their HD. Fighting a Large Ogre is different than fighting a 4HD orc. That was the effect I was going for.
