Considering that the airlines will sell miles for 2 1/2 cents/mile or less(if you buy in bulk) you're conversion ratio is way to high.

So the max an airline could offer in merchandise for 100 miles would be $1.50. They have to cover admin costs. I doubt they could go that high.

MCI recently offered 25000 miles for switching to them. At your 5 cents/mile ratio thats $1250.

The idea has merit, but your ratio is way, way too high.