Definitely an interesting way to do it, but has the downside of 'Ruining' some spells.The version I'm experimenting with is slightly different, as I treat initiative as group checks on both sides. The side who rolls higher starts first, and characters and monsters alternate sandwich style as above, but for added dynamics I let players and monster choose the order in which they want to act, at every round. This keeps players more engaged and allows them to strategize, but at the same time adds an element of unpredictability because they won't know if the big enemy will act last next round or not.
I.E. if I use Hold Person on the BBEG whose turn comes after 3 other party members but he instead jumps the line to 'next' and throws a save, Hold Person is less effective than expected.
The main reason I say sandwich is because it plays well with players roll everything, since people need to pay attention between their turns to roll the right "Defense Check".