Can you adapt this design so that the initial exit attempt only requires declaration of a coin ID and withdrawal address (and maybe block number), as proposed in Optimistic cheap multi-exit for Plasma (Cash or MVP)? That reduces the information necessary for an multi-coin exit in the happy case to a list of integers, which can sometimes be compressed to as little as 1 bit per coin or less.
That would mean that coin 2 needs to have the entire future of their coin, up to block N - 1, before they can authorize a transfer in block N, right? That seems pretty inconvenient. In particular, it puts a bottleneck on new block creation—the block operator needs to propagate block N - 1 to every transacting party, and they need to validate it before authorizing their transaction for block N. This is sort of like requiring preemptive confirm signatures.
I do agree there are catches inherent in the original Plasma Cash fork choice rule, although I think they can be solved using mechanisms like Reliable Exits of Withheld In-flight Transactions ("Limbo Exits").
Finally, does this even solve the problem of limbo exits? If Alice authorizes a transaction to Bob in block N, and the operator withholds block N from them, they don’t know if it’s safe to exit from Alice’s coin (and don’t have a valid proof to allow them to exit from Bob’s coin even if it is included in block N).