The Senate under this system (if you still intend 2 Senators per state, see my other comment) is going to get kind of weird. By which I mean so long as there are two major national parties, I would expect the Senate to have one member of each in every state. This fact alone would retain the tendency toward exactly two big parties even with the electoral reform otherwise weakening it, because you have to coalition to get your Senator.

This may be an issue with how you've structured things or how I'm reading them, but you should probably make it more explicit that preference voting shall be used to elect executives.

I would be fully prepared to give up all aspects which impose requirements on states for non-Federal elections in order to make this more palatable to the "states rights" types. Fixing Federal elections and forcing states to do all the hard implementation work to fix their own may be the best that can be accomplished.