Hello Yanmaani,
Incentives for UTXO consolidation already exists IMO.
2.If running full node for Bitcoin, it will help in a smaller UTXO set.
In few cases it affects privacy though like post coinjoin.
TBH I couldn't understand everything you mentioned including the part in which fees decrease is mentioned because of smaller block. Fees should increase if such blocks are regularly mined and are predictable IMO. Not sure if everyone will agree to the other things mentioned in the proposal.
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Prayank