Neat trick. But if you have to capture traffic on the server before sending anything, doesn't it make it kinda useless?
Not airtight, but ... something like that?
It's unbearably slow (especially when you use SSL over it, which I'd consider almost mandatory if you do this) for anything other than email and maybe running a few shell commands, however. Applying additional obfuscation/whitening to the data stream to make it harder to detect makes it even slower.