Would be nice to have a pool like this... Gives incentive to some smaller miners 
Small miners would just end up making even less because the pool would HAVE to have a higher overall fee in order to pay a reward for block finding. Small miners aren't expected to find a block *in their lifetime* these days. The chances of them ever seeing the bonus BTC reward is quite small, but they will be paying higher fees as a result of that potential bonus.
On average though you'd end up earning the same. The effect of the 5% finders fee would just be larger variance - like the 0.5% paid to the block finder on p2pool.
You'd think so, but that's not true because of the increasing difficulty. i.e. If I put 100ghash to work solo mining (and from here on I'm just going to spit out numbers since I'm not going to do the actual math), then I'd have, say, a 99.99% chance of not finding a block... but then the difficulty level increases, so then it'd be 99.992% chance, and so on.
I thought the same thing. The math is trickier than you think, and confused me for a long time.
However, it doesn't work quite that way, although for solomining the discrete nature of the reward may mean that your mining device fails before you solve a block where a pooled miner would at least earn something.
