I like the idea in theory but I think that an issue exists in the form of, well, PlayStation 3! Even now I find it stuttery at times (especially when AOEs are going off), and if you were to reduce it to one big FATE it would just mean everyone in the area would flock to it at once and my PS3 would melt!

With that said, I feel that with FATEs a lessening of the frequency is the best fix - nerf the EXP and people will be more likely to ignore them and soloing them is... rough. Make them less common but still common enough for them to be appealing and you both stop FATE powerleveling and you keep them worthwhile enough to still bother with.