Hi @dan,
have been on vacation and missed the initial update on this. I did not yet get to read all of the text but in general what I have seen I agree with Image support and so on and I love that this is getting into shape.
That been said I am having only one major concern, since @ben mentioned based on PHP and markdown
PHP Requirements
Does that mean I require a PHP server?
I loved in classic that the blog was managed by Classic and I could use stupid plain html hosting for my content. The unique selling point for Elements or Classic for me at least was that a non IT person can create a webpage and I can use low tech backends. So my hope / concerns for the blog system is just a requirement for PHP on the server site. Since Elements is doing the publishing it would be possible (?) to just generate all pages by elements and have them being static html. Even the approach you showed could do that. Instead of .md file use a .blog which could be a differently named md file. And then just process them into .html. Not sure how you do it for now.
Currently I am managing my pages based on handlebars and pug. To generate dynamic content via Node.js into static files. That approach is good enough for me as an IT person, but not for a non-Programmer. Also plain html hosting is cheaper then PHP because mostly they pack a Database with it and I rather spend my money on something like Elements then on the server.
If I am not using a backend, I do not need to worry about security of it.
You guys have already collections which can be used to gather data. So from what I am seeing what is missing is a way to get a collection or any collection and throw it into multiple pages 
But yeah not sure how it works but I hope the blog solution wont be a PHP MUST HAVE, since that would be a major show stopper for what I am trying to achieve. Because in that case I can just wrap a database behind it.
That been said, I could still work on single pages and use those as blogs, would have been just more handy to have the linking automated.
P.S.: Online Editing would have the same issues. Increasing the backend requirements.