Hey, at least miles are somewhat standardized (most airlines have about the same 25000 miles award, with just a couple smaller ones lowering that to 20000 or 15000 in some circumstances; no airline has a 10:1 ratio of the meaing of miles). The term "points" is already in use, but there's no standardization among points. For example, hotel programs call it points, but the ratio between some of them and others is 10-to-1! So the term "points" (without specificying the program) has no single meaning, while the term "miles" does. So you think changing it points would be less confusing? Only if everyone were dealing with only program. But the moment you deal with other programs, it gets more confusing.
Consider, for example, transferring credit card points (AMEX or Diners Club) to miles or points. At AMEX, they write things like "1000 points = 1000 miles" rather than "1000 MR points = 1000 miles", but it's still clear. But in the few cases where they transfer to points, they write gobblygook like "1000 points = 1300 points" and which points are which?
If you like points so much, stick with the airlines that use them! The new Virgin America does, JetBlue does, Qantas does, and Southwest uses credits. So what you propose already exists, but it's your job to choose the airline that uses that system if that's what you want (not the other airlines' job to change to mimic some LCCs).
Your whole analysis of how to earn and redeem points seems based on the shortsided notion that it's all domestic. Right now you can fly halfway across the world in a cramped economy seat for a certain number of miles, and if you want to fly the same route in business it's only double as many miles. But try to buy that seat and it's likely 5 to 10 times as much! Do you really want to lose the ability to get a "severe discount" by using miles? All airlines that use the "simplified" points system you descirbed lose the ability to get "severe discounts" like this. Sounds like you run airline rather than wanting to fly one if this is what you're proposing, because it sounds like it may or may not be good for the airline but it's certainly not good for the value-seeking passenger...
Additionally, because you're only collecting with United, you don't realize that (a) there are
both miles and points at airlines such as AA and BA (
different meanigs of
points between AA and BA, but
same meaning of
miles!), and (b) the term "C" is not the right for business class among all airlines, so by calling it "C" you're introducing the same kind of confusion you accuse whoever called them "miles" of doing! (At AA, for example, "C" is an upgrade bucket only, and it's "J" for Business Class.)
Finally, it's all historic. Same reason it's called First Class when you fly the class above economy on a two-class plane within the US but the very moment that same plane flies an international leg the cabin gets renamed Business. Yet in your description you accept that as ok while ranting about miles?
It's called miles because it started out (before any of those points programs you mention!) simple, without all the bonuses at first. It's called First Class in the US because it always was, and it's called Business outside the US because that's what airlines in the rest of the world called it when they added it (much later than the US).
PS. You can eliminate all the confusion you mentioned, btw, by simply prefixing the airilne to the term "miles" when you mean the currency, and leaving it off when you mean the distance. Thus: "I flew 12,500 miles round trip to/from Europe, but I earned UA 25,000 miles because I get double RDM due to my 1K status (which is actually from flying not 1,000 miles, but 100,000 miles, er, 80,000 miles with bonuses). Now I can redeem those UA 25,000 miles for a 5,000 mile roundtrip next month." With that very simple change, you eliminate all the confusion of the terminology. (It doesn't eliminate the confusion your parenthetical explanation of how you earned 1K is, but that confusion is the way you wrote sentence, not the term "miles". And any confusion about the name "1K" is UA-specific, why don't you tell them to change their tiers to silver/gold/platinum/whatever like most other airlines!)
Oh, and I don't know anyone who says "for a 5,000 mile roundtrip next month" (who measures the distance of their award trips if that is not how the award cost is determined???). Everyone I know call it "a coast-to-coast roundtrip" or names the specific destination they were able to go to for 25000 UA miles.