After all, the format has a proprietary format/structure that no tool (outside the SkyDNS sphere) knows about. So you've already invented a new protocol on top of DNS. You're not able to leverage any existing tool/library out there that resolves names via DNS, because they can't use your information. (SkyDNS can of course be used to look up A/CNAME records, which I totally agree is nice, but as more of a backwards-compatibility layer kind of thing.)
You do get some value from libc's name resolution, and you can institute a policy across your apps that they resolve subdomains relative to the domains listed in resolv.conf, so for one app to talk to another, they just look up "fnord", which resolves to "fnord.dc-east.production.example.com" or whatever. But I'm still not sure I see a lot of value over a client library that talks directly to etcd. You're going to want a client library anyway, to deal with those SRV records.