That doesn't solve the tanking problem, it just moves it from the worst teams in the league to the teams that are the 7-8 seeds. Admittedly teams wouldn't be tanking seasons away (just the games at the end that generally are more important to seeding). There would still be tanking due to the low chances of an #8 seed taking down a #1, especially in a scenario like the Eastern conference the past few years where it was all but certain that the Heat and Pacers would be in the conference finals.
It also doesn't address the problems of small/undesirable markets acquiring talent. Not that I was a fan of New Orleans getting the #1 pick right after the league sold it, but without it what All-star caliber player was going to NO in FA? Particularly after CP3 forced his way out. It would have been a perpetual bottom feeder, and under the system you propose, they would have little chance of improving their position. Even successful teams in small markets have had trouble acquiring top-tier free agents (see: SA, OKC) and often have to overpay to get mid-tier guys, a team that isn't even on the bubble would have even worse prospects and no mechanism to improve.