Note how you're basically proposing for the block interval to be decreased,
which has security implications due to increased orphan rates.

Note that the total transaction rate and block size don't materially change, so I don't
see why the orphan rate will change.  Normal blocks are constrained to have
all of the txs of the aux blocks, so propagation time should stay the same.  Am I missing
something?

Ah, yes, I'm missing that the expected time to find each type of block is halved, so the orphan rate doubles.