Al,
your assumption seems to be centered around a belief that everyone will somehow suddenly have whatever skill is necessary at any given moment maxed out, because all of a sudden, "every guard on the planet has maxed Listen" and "most characters have good Sense Motive scores." they both can't be true. and saying that hypotheically at any given point either can be true, just doesn't have any grounding in reality.
Not really. I'm assuming that characters max out skills most useful to their professional careers. Guards have to...um...guard. In spite of being fighters, they have little use for Jumping around or Climbing up and down- even Ride is likely to be somewhat useless. Thus, they are best maxing Listen and Spot- a guard is useless if he cannot hear someone sneak past him! If he maxes Spot as well (most guards should go Listen, Spot, then other skills), the poor PC rogue is 'double nerfed' since even if the guard only has a 30% chance of beating the rogue on either, his chances of passing one or the other means that the odds are the PC is detected...so much for the great sneak-thief. Likewise, those in positions of authority, court, or power would do well to invest ranks in Sense Motive.
it's my experience that nost people generally don't take more than one (two at most) cross class skills anyway
That's probably because they don't get that much return under the current system. Using an argument that under the status quo not many cc skills are taken is flawed- because you're changing the parameters, cc skills become more attractive, and more are taken. It's a bit like saying not many wizards take Gust of Wind, so it's okay if we add 30d6 sonic damage.
Why punish players with a cc skill that some game designer decided should be cc when the player can create a history to justify it being a class skill?
Players can justify anything given half the chance. One could 'justify' why your characters has to have 18 in all stats, 9th level spells, full BAB progression, d12 hp etc. 'Justification' usually means 'post facto excuse for powergaming', IME. If his 'history' is really that detailed, sink a feat into it.
They would already have a 5 point edge, assuming they had been putting max points and keep doing so
Unlikely. If the skill is sufficiently important for them to invest 10 points into it, they will doubtless max it altogether, leaving them just 2 points astray from the full level.
The cross-class character will always be five points behind in overall skill points for every cc skill they get changed to a class skill.
Which is fine assuming parity of skill points. But not all skill points are equal, due to the skill list (going back to the 'double balancing'). A fighter's skill points are worth less since they can only invest in a few less useful skills like Climb, Jump, Swim etc. Likewise, once Concentration, Spellcraft, Knowledge (arcana) and possibly one or two others are at decent levels, a wizard's skill points dramatically decline in value. This places the skill points at a closer parity, and removes of the balancing factors of the skill system.
I do not see how this could break the game when a PC that has it as class skill could always be 5 ranks higher.
I agree. It doesn't 'break the game'. It merely imposes a 'hidden nerf' on the skill heavy classes, particularly the ones dependent on opposed rolls- the ranger, rogue and bard. 'Break the game' is a bit dramatic, but it does make the classes (more) unequal.