I'm not really sure how these rules make the game "grittier," but here goes my comments:
1. I'm a little confused about how the magic item bonuses work and character bonuses work. My understanding is that it's the following:
1a. Magic items no longer have different level versions of them with different enhancement bonuses. Instead a given magic item just has one version - so instead of "+3 bloodclaw greatsword" you would just have "bloodclaw greatsword" for example. Then the amount of "plus" for the purpose of computing weapon power or property effects (like in the bloodclaw example, the number of points of damage you can self-inflict) is based on the highest level version of them whose level is less than the character level. However you don't get the enhancement bonus or critical bonus. Instead...
1b. You get a "masterwork" bonus of +1 per tier.
1c. You get a special bonus of +1 per 5 levels.
Note that this means you're ahead of the normal power curve. The normal power curve gives +6 over the whole 30 levels from magic items, but you've replaced that with +3 from masterwork bonuses and +6 character bonus, for a total of +9.
Also, how much do magical items with multiple leveled versions cost? Masterwork is just 5x normal, but how much is, for example, a bloodclaw greatsword? Is it just 5x normal? Is it the cost of the lowest leveled version? Is it calculated some other way?
2. I'm confused about how Hero Points work. This confusion seems to stem in part from how you say that Hero Points "replace milestones", but Hero Points are something you spend while milestones aren't something you spend, they're something that happens to you. Let me try to explain what I think you're saying:
2a. You don't keep track of milestones, action points, magic item dailies, or healing surges.
2b. Instead, you keep track of a "hero point" total. Your maximum hero points equals your maximum number of healing surges.
2c. You spend a Hero Point whenever you would spend an action point, healing surge, or magic item daily.
2d. The only ways to regain Hero Points are either (a) taking an extended rest or (b) eating the "hero point rejuvenation food."
If this is what you're saying, here are my comments:
1. You might need to make some sort of special case rulings for other things that are based on milestones, like the Artificer's arcane infusion power, that armor that increases its defense bonus based on number of milestones reached, or the "death penalty" after you are raised.
2. Power-wise, it's close to a wash. Players do get more action points (since they can use one every encounter) but that's balanced by having more things come out of the same pool so they are more likely to run out. However...
3. If you're going "by the book" in terms of treasure, it seems like players will almost always be able to afford plenty of hero point rejuvenation food so they will rarely have to worry about running out, and it will effectively be unlimited hero points. But another interesting idea comes to mind - maybe you could make it so you don't recover all your hero points after an extended rest - maybe you only recover one or two, or maybe none at all - so the "hero point rejuvenation food" is the primary way players regain hero points. Then if you limit the amount of hero point rejuvenation food players can get (either by making it expensive or otherwise hard to obtain) you give them another limited resource that they can't easily get back, and thus another possible plot point or incentive to find nonviolent solutions.
