I honestly do not see this as a useable solution for the same reasons that blinking bike lights are not allowed in Germany. It attracts the eye too much and can cause drivers (and other cyclists) to be distracted/annoyed.

If it could be replaced with a soft, constant glow that was around the entire wheel, I would accept it more readily. It would just need some light-wave guides to direct the light from the LEDs into a more diffuse circle.