Since this discussion seems to have taken a turn towards "compare the relative merits of jaer's system and the 4E system", I guess I might as well make another comment...
Sorry jaer, but I would never want to use your system. I don't even hold it as an ideal I would pursue if I had enough time to pull it off. I like thinking on my feet, and I hate providing so much detail as knowing every road in a whole town. I much prefer the more freeform, improvisational interpretation of 4E's skill rules, where players can help define things by their choices.
That said, I think you indirectly quoted me at one point, and in doing so you misunderstood my point.
You said something like "if you succeed at a diplomacy check, the guard is corrupt, but he is not corrupt if you fail the check", and mentioned the honest guard captain. This seems based on one of my examples, but is not an accurate interpretation of them.
In my example, the guard encountered by the PC is determined
before the check, not after. In my case, it would be determined by which kind of difficulty the PC wanted for the check. In some other case, it might be determined by random chance. Either way, the guard captain is probably going to be a character who was designed by the DM beforehand. and will continue to exist afterwards. Once the situation is set up, the Diplomacy check is resolved like a normal one, with the player trying to influence a predefined character. I guess I should use an example...
DM: Alright, your easy, untrained Streetwise check just failed, so you get totally lost and stuck in an alley. You hear guards coming up behind you quickly.
Player: Well, I will try to negotiate with the first guard who comes up, and explain to him how their king is the real villain and is deceiving them (the truth).
DM: Alright, Diplomacy then. Another Easy check?
Player: No way, I'll go for a Hard.
DM:

Alright then... A guard rushes by to check the alley you are in, and spots you. Amazingly enough, it turns out to be the captain of the guard himself.
Player: You mean that loyal paladin who was standing behind the king during the fake trial? Err... I explain to him about how all the evidence used in that trial was faked by the king's wizard. *rolls a natural twenty*
DM:

Well, he looks confused and conflicted. Other guards run up as you hide in the alley, asking him if he has seen you. He hesitantly says that he hasn't seen anything, and leads them away. You can take this chance to escape and meet up with your friends.
This is the kind of situation I would like.

I actually really like the idea of the level of challenge being transparent and decided by the player, simply because it makes things somewhat more tactical, and would make it easier for me to decide how to set up situations. Also, I hate mapping, so I would run this kind of thing with just general places, with the layout being indistinct and controlled by narrative necessity rather than predetermined ideas of my own.