Well first of all, if you have a standard you're striving for, with this system I think it's important to start with a flock that's uniform and breeds true. Otherwise each rotation is kind of like out-crossing and you're going to get too much variation. But if by standard you simply mean a certain level of quality, then it's not as important.
I agree that a six year old hen isn't necessarily too old. I suppose it depends how old the replacements are when you're going to cull the replacee. I didn't think of that. Either way it's a risk. You do have two hens per line so even if one doesn't make it to breeding you'd still have one.
Branching off a new line shouldn't be a problem. Of course it increases inbreeding but you're unlikely to get problems you can't fix by selection. When line breeding, problems are often blamed on inbreeding depression when the cause is poor selection. Even when inbreeding depression occurs, it's still not to late to start to diversify. If you practice proper selection your system could work indefinitely. And it doesn't exclude other breeding methods from being used simultaneously if you later decide to do so.