I like the idea.

As for the only problem, quantifying quality... Have the users fix this.
Instead of flagging, integrate the downvote system. if the quality sucks, the masses will down vote it, not flag it. The algorithm can then fix the main problem, payout to crappy posts.
Down voting could be a part of curating. So, a great deal of the masses would hunt for shit, down vote it and get steem for doing so. Additionally upvoting on posts can reward authors more steem. Whales and Dolphins can smash payout within the 7 day period, with ease. Minnows can give their say in up voting or down voting. I think this is an awesome idea Yallapapi.