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While I don't doubt that the group would have massacred goblins regardless... I have to wonder if it becomes more of a lopsided fight given that 4e goblins rely on a very minor positioning ability as the primary feature that makes them a nuisance to fight.
No doubt they would have, however the goblins - surprised as they were - were easy pickings. The layout out the rooms in KotS and the stealthy way my group infiltrated their lair - with Splugs help - made it easier to run the combats.
Although the goblins used their shifty ways to flank opponents and the fighter used his Combat Superiority <?> to swat the shifty goblins. It worked very well and the group - my very very slow group - destroyed the lair in one session. I'd recommend it for minor combats and keep the battlemat for the more climactic
Saying that I'm still working on my matless DM skills, I am going to use the "beside, near, far" scheme. One poster mentioned being fair and I think that is a big part of this, the players have to trust the DM. I also keep a little sketch of things behind the screen or use the layout maps in KotS for reference. It all feels very 2e to me.
You will lose some of the detail of 4e, so a feat that alows a teleport port an extra two squares may not have that much effect in a matless game as the positioning is not as exact. Still usefull for teleporting across chasms. I'm keeping an eye on powers and characters that may suffer from going matless.
I'll certain blog about it in a few months with more specifics, but for me the speed increase and the ability to smoothly switch to the mat if I need to is a winner.
How near is near and how far is far? If a power in RAW calls for a warlock to teleport five squares away from X but a wizard uses a power to teleport seven squares away from X, is the warlock still near X while the wizard is far from X, yet the warlock and wizard are close to each other?
How about movement? Does a single move action allow me to go from being far to near, or from near to close? But then, a shift would also allow me to go from being near to close or close to near, so a shift seems more potent and a move less so under the abstraction. It won't get you far (no pun intended), but otherwise it seems it would be as good as a move.
It would be up to the DM to adjudicate, same way it was done in 1e and 2e really. I think everyone had their own methods back then. The players will have to trust that the DM is going to allow them to shine and to realise that the positioning is not exact.
There tends to be a lot more player questions of the sort: "If I move can I get to the Orc Chief?". DM: "Only if you Run or Charge, but you'll get two OAs from his body guards on the way", and so on.
For fights with lots of combatants it becomes more of a burden to track everyone and answer all the questions, so play can be bogged down.