The proposed system is similar to ideas I proposed a way back (I'd link to them but my forum posts were "disappeared"), as a precondition needed for full clan-based RvR with nations being only a backdrop. I think this is a good move, both for its intended purpose and potentially for opening up some new mechanics and systems. I applaud @admin for taking a chance on it and think it's worth testing.
A couple of suggestions though... I'd still like to see a system where you could join a battle as an observer, before determining whether to engage, especially if there's reputation hits that you're weighing. Additionally, instead of just paying to reset your reputation I would like to see slow decay in reputation values. And most importantly I'd like to see positive reputation gain for consistently helping other nations, etc.
I think it would also make sense to make it so a clan's reputation is the sum/average of officer reputation, and make that clan reputation tied to being able to support trade and RvR activities (including port battle entry, hostility, etc. etc.).