Hong: It's not necessarily a bad thing, but under the existing system, it becomes really easy to beat certain class' saves and nearly impossible to beat others. Spells effectively become a rock-paper-scissors thing; if you pick the right save, you win, if not you lose. Too absolute for my tastes.
For most casters this might not be so bad, but one of the important parts of 3E is the increase in casters with limited spell knowledge (Sorcerer, Bard, Psion, Psychic Warrior, lots of prestige classes). A Sorcerer doesn't always have a choice, he might HAVE to use the Fireball against you. With 3 save types and 5 elements, there are too many times when he doesn't have a spell that can hurt you. It doesn't really get better as time goes on, since he'll still need to be attacking with high-level spells for the save DC (or Heighten everything, which makes you run out of high-level slots really fast).
Personally I like a system where the near-immune people are less immune and those people with lousy saves are a bit better. Leveling the playing field a bit, so to speak. The 2-stat save system lets me do that without a huge amount of bookkeeping. It's not a HUGE effect, it's not going to radically change the classes, but it helps. Sorcerers and Wizards improve slightly, Rogues/Clerics/Druids decrease slightly, and most of the tank-types are basically unaffected.
Just take your characters and see what their saves would be under this system. Ask your players if they would have done their stats differently if this had been the rule at the start. Frankly, I'd be surprised if anything changed by enough to really skew your game balance.
(I also just hate how CHA always ends up as a dump stat.)
MMU1: Sure, you could do that, although I think you have to draw the line somewhere for the sake of simplicity. If you can think of good explanations to use both DEX and INT for Initiative, feel free, but I just wanted to change the save system.