Will it work? My guess is that it will. Besides the fact that players will always run the heck out of the game's latest raid (and Blizzard can definitely use that as justification that it's a popular way to do things), I think any move that gives players more options will be received well. Some guilds will try to run all four modes all the time, and will get sick of the instance way before any new content shows up, but I think most folks will just choose one or two difficulties to run every week (say, 25-man Heroic with their guild, and 10-man Heroic with a PuG), and get their gear from there. Whether we'll see this again in Icecrown, however, I'm not sure -- this seems like a setup for a lower-tier instance that everyone gets to run, not an expansion-ending, top-of-the-line raid. Blizzard may go back to the normal 10 and 25-man setup for Icecrown, and then bring this scheme back for instances in the next expansion, whatever that may be.
Patch 3.2 will bring about a new 5, 10, and 25 man instance to WoW, and usher in a new 40-man battleground called the Isle of Conquest. WoW.com will have you covered every step of the way, from extensive PTR coverage through the official live release. Check out WoW.com's Guide to Patch 3.2 for all the latest!