How the current implementation addresses the following criticism?
Addresses should generally not be reused. Reusing addresses harms the your security and privacy as well as the privacy of all Bitcoin users. Extensive address reuse contributes to systemic risks which endangers the system (what happens when RPG wielding ninjas show up at mining farms with demands to not mine transactions belonging to their enemies? If regular transactions are conducted so that they are indistinguishable to their author's enemies we never need to find out). While the community may not go so far as to prohibit reuse, building infrastructure that rewards it is not a good plan.
The current implementation does not restrict the type of output. It applies to any scriptPubKey. So people may, for example, 'register' stealth address with OP_RETURN. This implementation could also replace txid in daily use. It is even better than txid because it directs to a specific output in a tx.
These short addresses are immediately subject to lookalike attacks-- a popular address is "wolf larceny tape butter" ... great, I go and create "golf larceny tape butter", "wolf larceny ape butter", "wolf larceny tape butler" and so on... I spam these clones out in various places or just trust human error to guide things along, and now I'm receiving funds from other people. We don't even need an attacker here, all outputs are constantly being assigned addresses, the space of working addresses dense-- instead of the very intentionally sparse case which we have with addresses today where its nearly impossible to send to an incorrectly entered address.
With adequate checksum bits, the odds of successful lookalike attacks is extremely slim. Even a miner could not try to mine a "vanity address" because they have to discard successful block hash for such vanity address mining (blockhash is part of the checksum)
As you note, the security here is totally undermined by a reorg. So beyond chance reorgs breaking things for people and causing their funds to go off to be lost in space, now there is a great incentive to reorg that didn't exist before. (there also is some fun nuisance perversion like miners selling high value vanity positions in blocks with this particular scheme; spamming up the chain to make sure to register the really goods one, sometimes requiring large indexes.).
A reorg will make the checksum invalid. The address is safe to use even with only 1 confirmation. As mentioned, it is not possible to mine a vanity address
One could not resolve these addresses without a copy of the entire blockchain or at least a forever growing unprunable database (as with firstbits) which would need to be accessable to each and every wallet. In practice most people would depend on centralized services to resolve these (as they did with firstbits), and in practice the services will eventually return wrong results, even without intentional fraud (as with firstbits). Of course, any of these services would be prime targets for compromise; a well timed replacement could redirect huge flows of funds.
It is SPV verifiable. In practice, an SPV client will ask a centralized service to resolve, and to provide the compact proof
This also requires a separate registration step, which reduces the scalability of the system due to additional overhead, and makes the system less instant gratification. You end up with something where you have to pay fees to establish an 'identity' just to receive funds to pay the fees with. Necessitating multiple use modes.
People could do it when they are doing real transaction, so the marginal cost and harm is lowered