This is probably a reasonable way to handle sesamstraße.example, but how do we manage if skroutz.gr wishes to become σκρουτζ.com? Do we grant them scrooge.com in a non-Greek locale, as Skroutz is the Greek transliteration of Scrooge, or do they get stuck with the letter-for-letter skroutz.com? Will I go to a different site depending on my locale if I type scrooge.com?
What happens when someone registers θεν.com and someone else gets δεν.com, since both transliterate into ASCII as then.com?
That was why I thought that for the reason to work the entity has already have to have registered both (or more) domain names and both domains must, possible in DNS records, indicate their respective equivalence. So no automatic translation, but definitive opt-in by the domain owners.
What happens when someone registers θεν.com and someone else gets δεν.com, since both transliterate into ASCII as then.com?
In short, the idea has many potential pitfalls.