Your idea is very interesting, but has one big flaw: It's too complex and time-consuming for a user.
At this point, I, as a user, would have left your service for good. Look at all those extra steps... When I have to enter a password, I enter the password and BAAAM, logged in. I additionally can use a password manager. That way I won't even have to remember that 36 character long thing of a password.