My concern with this is the potential lack of breadth. With no set curriculum, it’s too easy for a student to focus on one area of interest and never stray outside that. While, theoretically, exposure to the projects of other students could expand an individual’s horizons and spark new questions in new areas, I don’t think that’s sufficiently reliable.
I agree that something needs to change, but I think this may be a little too far. Perhaps a combination of structured overview teaching and independent project work like this would work better.