Well, sure, NPCs disappear and appear, of course. That is a very small price to pay for getting more equal matches, more opposition as in different teams, faster opposition since the pool is larger... Honestly, I can't see any valid arguments why this system isn't superior to the one we have. I could even bet that this system could attract more players into the game and personally I see it as the biggest game changer this game has ever had even planned, including the engine upgrade itself.
Also, issues like these can be easily worked out. Make the phasing players transparent for a while so no collision issues. District chat is rather pointless for many, mostly filled with garbage. Social is the district where you can socialize. Immersion is not taken out but made better since you actually match with equal players and the phasing procedure is quick and not happening every time a match begins. Even solo, you get more chances to play with equally skilled other solo players than put in a team with a random less skilled team. You could even make "friends" this way. Less frustration, more fun pew pewing.