Hi, Sp@rt101.
First off, thanks for the post. Your proposal sounds interesting, and it sounds like it works for Guild Wars.
Currently, players who are AFK for 21 days, go into a FROZEN status; they do not earn any points, and are removed from their rank, until they return (additionally, players who are AFK for 60 days will have his or her accounts deleted, and they will have to start from scratch again). Rather than penalize all players by 5% each night (which would also affect new players and players who have lost points), it might make more sense to penalize AFK players (those who have not played in 21 days) by removing 5% of his/her score each day until they return (or reach 700 points, the beginning minimum).
Definitely something to look into, as well as discuss.
Thanks,
Doug