I believe Snape's motivations are more personal than trying to help Slytherin House. He's remembering how he was bullied by James, and his conversation about the topic with Harry prompted him to devise this scheme to fight bullying today. He's basically looking for redemption, having perhaps abandoned his love for Lily after talking with Harry and also after the Interlude with the Confessor.
This explains why he's starting this scheme now, rather than as soon as he became Head of Slytherin.
He's hiding this from Dumbledore because Dumbledore explicitly acted against his plot: he tried to stop the SPHEW-bully fights, in the end by the drastic method of ordering Snape to disband them and publicly humiliate and punish Hermione. Dumbledore explained his actions and motivations several times to Harry.
How do you reconcile the scheme being conducted by Snape with one of the main victims being Hermione? This scheme could plausibly end in her death or lifelong imprisonment in Azkaban (a slower death). He had previously tried to help Hermione in an embarrassing way (and doesn't she resemble Lily in being Muggle-born?).
EDIT: New discussion thread here.
This is a new thread to discuss Eliezer Yudkowsky's Harry Potter and the Methods of Rationality and anything related to it. With two chapters recently the previous thread has very quickly reached 500 comments. The latest chapter as of 17th March 2012 is Ch. 79.
There is now a site dedicated to the story at hpmor.com, which is now the place to go to find the authors notes and all sorts of other goodies. AdeleneDawner has kept an archive of Author's Notes. (This goes up to the notes for chapter 76, and is now not updating. The authors notes from chapter 77 onwards are on hpmor.com.)
The first 5 discussion threads are on the main page under the harry_potter tag. Threads 6 and on (including this one) are in the discussion section using its separate tag system. Also: one, two, three, four, five, six, seven, eight, nine, ten.
As a reminder, it's often useful to start your comment by indicating which chapter you are commenting on.
Spoiler Warning: this thread is full of spoilers. With few exceptions, spoilers for MOR and canon are fair game to post, without warning or rot13. More specifically: