I use a very simple house rule. With it I don't have to change anything with the underlying system. Everything about it stays exactly the same.
All damage dealt by players (whether from a weapon or spell), is increased by their level up to level 10.
- If you are level 1, you get a +1 to all damage. Level 5 gets a +5, etc.
Once your bonus is +10, your damage goes up by +1 every even level.
- So level 12 your damage is +11, and 14 is +12, etc.
I don't know if anyone else mentioned this house rule or not. I gave up reading after page 2. Having to use different dice means having to create custom stunt charts, and some serious overhauling to the system, and most of that just gives me a headache. This rule lets me dig right in, while letting my players feel heroic.
The second part though should be designed to counter the other aspect of the HP bloat which is the cumulative Con. I threw together a spreadsheet and found that if you extend your rule such that for all levels 1-20 that this will minimize the bloat for a level 1 character with 25 HP and 2 Con for all levels.
In short, your rule works well against one source of HP bloat and if it is increased to +dmg per level for all levels it will do a fairly decent job at dealing with the second source of HP bloat.
Your method fights HP bloat with Damage bloat, while my style prefers to remove the bloat. Your method leaves characters with no combat specializations (like is easily possible in Blue Rose) with a mysterious source of combat effectiveness.
These methods though don't address armor very well. AR still needs addressing and probably needs a different approach. Based on your method, the character could be presented at the choice of having an additional damage or having additional AR potential. Perhaps that could be addressed in class design. I don't have any recommendations at the moment. I currently just half the AR values from equipment in the rule book.
Having a static increasing modifier doesn't scale well with the different weapon types. A 2H weapon at level 20 would average 25.5 vs a 1H weapon at 22.