That might be suitable in some cases. With Bitcoin, lightweight clients can download just the 80-byte block headers for each block and still securely verify transactions, but this is only possible because the network verifies transactions before including them in blocks. The network can’t verify overlay transactions, so overlay clients will have to download the entire block chain. This will become a problem when the block chain is 1,000,000 blocks long and you have to download 1+ TB of data to use BitDNS.
A more minor problem is that the bitcoins associated with these transactions become unusable. If the transaction is spent, the network is allowed to forget about it, so you must keep the transaction unspent for as long as you need the data within it to stay alive. Also, Bitcoin clients will not recognize non-standard transactions. If you send one of these transactions to someone not using a modified client, they will just ignore it.
It’s unnecessary to use OP_NOP1 as a flag. Just say:
“BitDNSv0001