1) People wishing to bring up an instance of reddit could do so easily. The currently default settings of the reddit codebase make it pretty hard to get it running, mostly because it's optimized for reddit's at-scale setup. We'd package it up with some nice default settings and how-to guides so that little Aiden could install it on his dorm computer. Call each of these separate installations of reddit an "instance."

https://github.com/reddit/reddit-vagrant

^ This should give anyone who is interested in getting reddit up quickly a great head start. In fact, it takes about 15 minutes or so. It should also work across OSX, Windows, and Linux, although admittedly testing on windows has been sparse.

Reddit as it is now installed on many machines across the world with a network of bots for duplicating content along with an index of what subreddits are where would get most of the benefit of a system as described. An application on top of such a system could effectively aggregate content to create a distributed frontpage. I think this is closer than you think, although the perfect engineering solution is far off.