I like this idea a lot. I think it could work on a much larger scale. Nothing motivates people as much as money. Learning for some hypothetical goal down the road is just too abstract for a lot of kids. They want instant gratification. Let's face it, public education is nothing more than training people how to be good worker bees. Why not give them a real world application of it?
We're already throwing a huge amount of money into public schools and it doesn't seem to be working because the problem is motivation of students. No amount of technology or gimmicks can get around the fact that many kids just don't want to learn. They tend to bring others down with them too. I remember being in school and having trouble focusing on anything because of the classroom distractions.
So basically the kid gets $X for passing a test on a sliding scale.
Passing a term would be an additional $Y
I guess the real question is how much money is involved and how do you pay for it but I'm a tax & spend liberal so that's an easy answer for me.