As explained in some of the other comments, there are some good points about it, but it's got some major flaws. One thing I really don't like is that the teachers are House-identified. They're players in the game, and it's OK for them to arbitrarily punish kids from other Houses and show favoritism to their own. That's like making coaches the referees. Hmmm, maybe that's why the House Cup ends up getting decided by something as random as "Who can catch the golden mosquito first?"
An idea I had: Sort kids into the House that's their greatest weakness/what they're least like/the element they need most to improve. So the Hat would be like, "Well, Draco Malfoy, hrmmmnnnn...better be: HUFFLEPUFF!" "Harry Potter...unfamiliar to the Wizarding World, as like to eat an Exploding Snap as play it properly. If I don't do something you might just cast some random curse labeled 'For an Enemy' on somebody without figuring out what it does first...better be: RAVENCLAW!" "Neville Longbottom...you could go faaaarrrrr, in Slytherin." "Not Slytherin! Anything but Slytherin!" "Ooooh, a wise guy, eh? GRIFFINDOR!"
In each House, kids are taught the virtues of that House, rather than put there because they've already got 'em. And also, everyone gets Sorted each year, so you're not pigeonholed once and for all as an 11 year-old (what, nobody who was a bully at 11 ever learns his/her lesson and becomes a better grownup?).
This system would help kids become more well-rounded. Just look how much MoR!Neville is benefiting from his "tuition" by Harry, who is the very model of a modern NiceGuy!Slytherin. Even in canon, Neville does seem to benefit in terms of developing courage and getting over his fears by being Sorted into Gryffindor when (in the canon Sorting process) he "should" have been a Hufflepuff. Plus, since everybody would probably be Sorted through more than one House during their school years, it wouldn't divide the whole freaking society into four sects. Also, it would change things up a bit so one House that got the good Seeker when s/he was 11 wouldn't always, always win the Cup.
What makes the Houses have their particular character? the diktats of the Head? that 7th-year students remember what they were taught about the House the last time, they were Sorted into it, 3 years ago, and try to teach the others? I like the idea of putting people into Houses that they have the most to learn from, but then I think that you have to keep the House assignments permanent, or else lose the House characters entirely. (Not that that would necessarily be a bad thing ….)
Update: This post has also been superseded - new comments belong in the latest thread.
The second thread has now also exceeded 500 comments, so after 42 chapters of MoR it's time for a new thread.
From the first thread: