I agree with your thoughts. To answer your question I will quote Blocktrades, as I don't have technical knowledge or skills of how it would be accomplished. When I asked Blocktrades if it will be possible to lower the 3 second block production time, the answer was as following:
"It is definitely possible, based on things we've done to latency times in the p2p layer. But I suspect there would be a fair amount of work on the blockchain side of the code and it would need further investigation."