Days late on this, sorry about that, but I originally thought that this shuttle would run to Manhattan and terminate at some station like Whitehall, seeing that the Montague tunnel has to be used somehow. I'm no professional here, but I've looked at the proposal again and I now certainly agree with your point. Cutting the shuttle down to Brooklyn is a horrible idea, not even counting the "real problems" you mentioned into consideration.
That said, route length certainly isn't and shouldn't be a main factor to solving this problem. However, it's important to make sure a line of long length is held down less by these problems of merges and timing/signaling/terminal ops. than small lines since a wider swath of riders and events pass through it day by day. I'm not on the boat of cutting service across the river since it addresses length and side notes other major problems you mentioned, when it should really be the other way around.