Hi Byron
At a first glance at least, I would not agree with your new SEO. I definitely prefer your actual flat pyramid url scheme than this new high piramid url proposed.
Google will never read those deep new urls!
Maybe I would try to change your actual ones, but never hiding them three leves deep beneath earth...After undergoing such penalties I personally would not be so much afraid on making huge changes, and I would take the "risk" of changing them but do not hiding them!
Hope it helps to build a panorama.
Good luck
Cheers from a sunny winter in Spain
Claudio

but let us move forward)