Hmm. It does sound intriguing...breaking people into more intimate circles while still keeping the forum open for everyone to converse in. Hum.
What would stop people from enlisting in different domains? If they could be part of multiple ones (which I imagine most people would be...we're all curious about what's behind "keep out" doors), it would be like the subgroups...perhaps a little smaller, but not much.
Also, if being part of multiple domains was not an option, I wonder if people would actually take advantage of the smaller atmosphere. Even those of us who long for the small-community feel of the old intpf might get turned off if there are only, say, three or four people who belong to our domain. Maybe a compromise could be reached...allowing people to be part of a certain number of domains, perhaps?
Anyway, it's intriguing. Is this system something you just formed, or have you seen it in action somewhere?