Balkanization
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Under the new, slimmer (!) Platini regime, these ideas are now getting a hearing. But, as Johnathan Wilson points out, it's hard to imagine how the hell they would actually work. Why should a small country play in a regional league if it means giving up a guaranteed spot in the Champions League?
This is actually quite an interesting problem. Basically, the dynamics of European football are such that there is every incentive to Balkanization. Montenegro, for instance, has a spot in the Champions League this year (FK Zeta, for the anoraks out there). Not bad for a country less than a year old. They might even make the second round, since their first-round opponents FC Kaunas aren't exactly Brazil.
But what happens through Balkanization is that we get longer and longer preliminary rounds (I know it's probably passed you by, but this year's intertoto cup has actually been going on for almost a month now, with two two-leg rounds already complete) of staggering irrelevance. It's still the same old gang of big clubs who end up in the real tournaments every year anyway.
(Schadenfreude moment - EXCEPT BAYERN. HA!)
Now why should teams in small league prefer two or possibly four money matches in the Champions' League to a season full of decent domestic (or in this case "regional") football? The answer is "money. CL participation brings a lot of cash, and in the dodgier parts of Eastern Europe, that's worth something. Possibly, when the region's economies improve to the point that quality domestic/regional football is a paying proposition, this option might become viable. But as it is, I have to agree with Wilson's assessment that it's a difficult proposition to sell.
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