I read it. You had some good ideas other than the main one I tend to disagree with. You propose they go back to their old ways and just give us the dialogue wheel between each and every sentence, albeit a little earlier so we can have our response picked before the npc is finished speaking, and therefore the conversation would flow naturallly. I'm more of the mind they move forward and keep trying to find new ways to make it more fluid, not just going back to the old. Because that wasn't particularly fluid either.
It doesn't have to be every single sentence, just as we don't have to cut every single pause. You have a variety of different ways you can mask the pause and you have some instances where a pause isn't appropriate at all. Part of being fluid and natural is not rigidly applying one tactic to every instance. There are many options.
-Get the characters moving more. Have a conversationg with say, Tali when she's actually working on something (fixing the engines or whatever) and you have a few spots where pauses are already there.
-Amp-up non-verbal reactions: one of the reasons the pauses are so jarring is that both Shepard and the NPC literally wait for you to make a choice. Blank faces, unmoving. This is where I suggested facial expressions like the PC is lost in thought on concentrating on something. If it's a tense, emotional situation, have the characters react nonverbally until a response is chosen. These are actually the worst times to have a "blank pause" Shepard just heard something that angered him, he turns around ready to deliver the smackdown and.... stares vacantly until you decide which flavor of pissed off he is. However it'd be a different story if he was visibly fuming/staring the NPC down. At that point you can even play those pauses for effect. For an opposite example, during a non-sex romance scene you can have the characters touching, moving closer together.. all that couple-y stuff. Non-verbal reactions (particularly emotional ones) may seem to carry the same sense of railroading autodialogue does, except you still have a chance to "cancel" the emotion when you do finally speak. Example: Shepard turns pissed off and ready to pounce, but if you pick the non-pissed off option he visibly forces himself to relax and calm down.
-Presenting the dialogue wheel earlier as I described above.
The whole idea of "naturalizing conversation" isn't necessarily to eliminate pauses but to react (or seemingly) react as soon as you feasibly get the idea of what's being said to you. And those reactions can be verbal or non-verbal.
Finally you can always put a timer on the wheel. You can mask the pauses all you want but if the game still waits for the player indefinitely at some point it's still going to break down. If the time elapses paragon or renegade score determines which choice is said. People can reload if they don't like a choice (they already do anyway).