So...spells are just...Spells. Mystical arcane formulae that the wizard is driven to find and learn to increase their power...and the effectiveness of the spell is what goes up with the caster's level...not the innate "circle/tier/level/mystery" of the spell itself?
What say you?
I think if you did that straight, you'd run into the same issues that caused them to put damage dice caps and similar restriction in the first place. Plus, you need some way to explain what a 1st level
disintergrate does. Try that on a dragon, and all it does is remove any mold or dust from his scales.
That said, I think you could combine the basics of the idea with their statement of flirting with spell slots being about the power of the spell that goes in them, rather than the level of the spell. Assume that such slots are on the same scale as the caster. Say a 5th level wizard has 3 1st level slots, 2 3rd level slots, and 1 5th level slot. He can put any spell he wants in that 5th level slot, and it will get 5th level characteristics.
Then for the issues of caps, those are essentially minimum and maximum ranges of effectiveness. Say
disintergrate scales by caster level, ranging in effectiveness from 10th to 20th. That means that you can put it in any slot of 10th to 20th level, and get the resulting effects. You can put it in a lower level slot, but it will basically fizzle. You must be "this tall" to use it. Whereas
sleep might range from 1st to 10th. You can put it in a greater slot if you want, but the spell caps out at 10th caster level. You can only put so much sleep juice in a hose.
Or in other words, casters have level-based slots, that correspond to what they can do, and thus are scaled on the caster levels. Whereas spells have no particular level, but do fit in a band. Spells are more concerned with boundaries than the precise level of the effect. This will make them easier to get right, since the precise level is not important.
Naturally, that is going to cause spells to fall into a handful of bands that will get named (for clean design purposes, if nothing else), though probably less than 9 or 10 such bands. IMHO, there are about 5 or 6 clear jumps in power in all of D&D magic (all versions), from cantrips to wishes. Me, I'd name these bands as "circles" and tie them to some kind of skill on the apprentice to master range, so that apprentices cast "cantrips" and so on. You'd naturally have some overlap in the spell boundaries. So a 5th level "journeyman" caster will find spells that cap off at 1st or 2nd, some built around his level, and others that he can barely do (5th level lower boundary). That should span at least three bands.
Note that one of the nice things about such a system is that you have a lot more flexibility in how the casters pick up slots. Instead of the traditional 3/2/1 type of mix of 1st through 3rd level "spell slots", you might give a caster a base of one slot per caster level. So a 5th level wizard has one 1st level slot, one 2nd level slot, etc. to one 5th level slot. As before, he can put any spell with the correct boundaries in those slots. Then provide some class bonuses, feats, etc. to expand that a bit for customization. OTOH, a lesser caster, such as a bard, might only get a base slot at 1st, 3rd, and 5th. The power of his 5th level slot is as good as the wizards (depending upon what he has found to put in it), but he doesn't have near the flexibility. Alternately, you can have straight adjustments. Maybe the bard's slots are always 2 levels behind his character level--i.e. he gets one slot per character level, but not for his most recent two levels.
