The presence of the World Cup pretty much devalues all other ODI cricket though; Test cricket doesn't need a similar event doing the same.
There's two immediate challenges for Test cricket to overcome for an event like this - the presence of the draw makes Test cricket unsuited to a knockout format, and the fact that Test cricket takes 5 days gives you a scheduling headache. A proper Championship, with the same format as the Champions Trophy (2 groups of 4, everyone plays each other in their group once, semi finals and finals), even allowing for games in the same group to be played simultaneously, would need 45 days set aside for it, and that's without taking into account rest days. There simply isn't the room in the schedule to do that. You'd probably have to play semi finals simultaneously, which isn't ideal from a broacasting perspective, which in turn affects the profitability of the competition. So you end up with the proposed format (4 teams, 2 semi finals and one final) which proposes crowning a team as World Test Champions on the back of two wins (and that's assuming all games have a definitive result) which at a stroke undermines the whole idea of climbing up to the top of the rankings by virtue of winning long series home and away. The Test rankings are still taken seriously; the ODI rankings are a joke if the World Champions can be ranked at number 5 and the rankings fail to differentiate between a tri-series game in Zimbabwe and a World Cup Final.
As for staging it in England? Aside from the major issue of British weather and the presence of the draw in a knockout competition, there's a limit to how much Test cricket can be watched; if the English public's appetite for Test cricket was so great, then Yorkshire CCC wouldn't have lost money by hosting the 2nd Test between Pakistan and Australia last summer. I also think that the Test Championship would struggle to grab the attention of the public in an Ashes summer. Two one-off games or a 5 Test Ashes series which immediately leads into an away Ashes series? I know which one I'd be most interested in watching as a fan.
If the ICC want a Test Championship, then they need to work out these issues and do it properly; the format proposed was a shoddy comprimise and looks like nothing more than a money making event for the ICC. Test Cricket deserves better.
Yes I agree with a number of the points you made there, I never said this was a foolproof way of ensuring Test cricket becomes the prime number one format for people to watch, or will it give it us a defining Test Champion, as you say those rankings are done over a period of time and two wins for a nation should give them right to be called Test champions.
What I am in favour of is trying something to bring Test cricket back into focus. Crowds are falling away and we have to be proactive about getting it back on track. From a financial perspective I think we're all aware it is not a great option, as we've already stated the Champions Trophy will bring in a great deal more profit.
You're right that the British public can have too much Test cricket to watch, but that all depends on how it's priced. If we want crowds back into the grounds, and for neutral matches aswell, then the ticket cost would have to come down. Ideally this is about re-invigorating Test cricket not making a ruck of money, again I say ideally. I don't think this was necessarily an ICC money-making project if indeed they were prepared to scrap the Champions Trophy, which is exactly that.
In terms of the draw being a problem, I'm not sure it would be, as there should be benefits in finishing higher up the ICC rankings, therefore similar to how it's done in the Aussie Sheffield Shield final, the team that finishes higher only needs a draw. We've seen dull cricket as a result of this ruling, with the higher team batting for days which would not have people flocking back to watch Test cricket, but on certain pitches over here you hope that balance between bat and ball could be achieved.
It does need more thought, maybe the year of an Ashes series is not an ideal time to hold it in England, but I still think something along these lines could raise interest in Test cricket, and therefore be a good thing for the game.