Only trouble I can think of with a 3m radius to start, while an interesting idea, would be for new players. One of the draws to this game (for me anyway) is the ability to create a homestead and experiment with crafts. This needs a certain amount of room from the beginning. Limiting a new player's ability to do this might hurt new player retention?
When I start the game, I notice I have to choose the character name, and then log in. This leads me to believe that there will be second, third, etc. characters sometime in the future. Perhaps a long time, but why else have that mechanic coded in?
One idea might be to allow for safe zones around homesteads, like we have now, for a new customer's first character. Subsequent characters do not get a safe zone.
Allows first time players a chance to chill out, learn the game, be able to enjoy what has brought many of us to this game. (Not all, I understand) By the time you make a second character, you've hopefully made some friends, or at the very least negotiated an agreement with your local castle for protection in return for a steady supply of eggs and vegetables.
Also, down the road, would encourage people to keep their first characters which by then would have become old coots (many seasons having passed), and we can kick back on pioneer rocking chairs complaining about the yoots of today.
Oh, and Joe, that is a beautifully complicated suggestion. You should be an engineer