Critique my idea for the future of music
pedalpete: First off, you shouldn't be discouraged just because the large company you work for didn't move forward with your idea. 
Just because they haven't done it yet, maybe they need a reminder, or maybe there is a reason it didn't go further.Often a big company needs a stake holder and champion. Maybe they were expecting you to grab the ball and run with it after the meetings you had. 
This speaks directly to the 1% inspiration, 99% perspiration. Big companies often don't follow through, just  like start-ups.I assume the company you work for is already in this space, and has the power to get something like this done. If so, you may be in a great position to get this accomplished.As with any business, you will run into challenges.The big challenges I see are
1) artists want to be discovered, and MySpace is the defacto location for that. Then their is iLike, last.fm, etc. etc. etc. Reinventing the wheel just because of the 'local' components might be a serious challenge, as artists want to go and global quickly. 
2) look at sites like Amie Street for an example of what is happening in the Indie space. They are really creative and doing some great stuff. More recently they've been working with the big labels because (in all honesty, I believe) it is difficult to build a music community only on the indie community. Even people who say they support indie often like the major artist stuff too.If you've got the chops or contacts to get it built, give it a go and see what you can do in your local scene. You'll learn a ton just from the experience.There is no guarantee of a success or failure, and I don't see any truly significant flaws.