That starting procedure is as workable as any other. The difference is that it pretty much guarantees the drivers will hit corner 1 as a pack. If the starting grid is more spread out, there's more chance of them flowing through in something approximating a line. Also, the closer the cars are together, the more likely you are to have issues if someone gets a lag spike.
My opinion is that the cars should be as far apart as possible at the start, without putting the guys at the back too far away from the action that they'll never catch up. I think aiming for 2~4 car lengths is not unreasonable.
Personally, I won't ever be anywhere near as close to the car in front of me as Masi's picture shows. I want room in front of me to avoid the inevitable accident in turn 1, and I'm confident enough that I can make up the second or so it might cost me by starting a few metres further back.
