That's a preferable system to be sure, and one I've seen adopted to some extent on other forums. I wouldn't necessarily agree with the limit on the number of moderators, as large forums need extensive management,
but I would have forum rules and policies decided and voted on by the membership as a whole and mods elected annually to enforce these rules and policies. They would also be instantly recallable in the case of misconduct.
I've also been watching the forum, and they apparently think that a new user named "The Riddler" is another sock puppet of mine. He isn't; I wouldn't choose such a stupid name for a sock puppet.
That must really suck for him, though. He was just banned for no apparent reason.