I have mine set up to do -4 Init from 51-75% and -8 from 76-100%, with -12, -1 Moves at 101%. This works well considering that my armor gives no penalty and you can choose strength bonuses to stay at 0 penalties. It works great for how I am balancing things, but I think your way could work too. The only problem I see is that it is a little too incremental in penalties.
Whatever the final system we get is, it just needs to have specific numbers in mind for specific armor types and traits. Since we are so early in the beta, they are still probably waiting for the core mechanics to stabilize before crunching the numbers.
I really need to give your mod a try. You keep spouting off some pretty reasonable numbers and systems for things.
In terms of OP, the initiative system is overall WAY better than the willy-nilly one side goes then other mechanic of WoM. The current implementation, however, is a bit screwy in that many of the systems have multiple layers of costs that make many of the improvements ultimately "not worth it".
Make it so that "- initiative" is strictly based off encumbrance and nothing else, and make it so that the "wait" option bumps you back a few initiative phases rather than if the model had actually acted, and I think we would see the Initiative system make a lot more sense.
I personally would also like to only see the next 5 or so turns, since the huge list of sometimes repeating units clutters the screen and is really not very useful past the first handful.