I agree that this solution also solves the problem set out by the PEP, and I think it’ll do it in a way that is healthier for our ecosystem as a whole.
PEP 708 solves the biggest argument against (as soon as installers implement it), and the rest is basically just the UX of helping users specify an additional index.
I’m not convinced that hosting the index is prohibitive - it’s a fairly trivial format, and there are plenty of companies that already offer free or paid hosting for a PyPI-like feed. (Even more if you’re willing to generate the index and use static file storage, which is absolutely doable.)
The issue is that users won’t do it, dependents can’t do it, and malicious users will take advantage of it. So if we can solve for those three, then I don’t think there’s any real issue in having large packages published to their own index.