I like the thought of tying magic to a characters soul and I think it would awesome of they could have spells change with the characters. So even if a few characters cast the same spell, each one would like different depending on their personality/beliefs. So if the pc can change alignments (good/evil etc) a spell cast by a good character would look bright and shiny but an evil character's same spell would look dark and foreboding. Now obviously this could add a lot of work depending on how the game engine handles spell effects, so having unimportant npcs use generic versions would likely be understandably required.
This would give the magic in the game more variety visually without having to have dozens and dozens of spells. Don't get me wrong, in a p&p game I love going through tons of spell lists, but in a game, I don't want to have 4 toolbars full of spells with more sitting in my spell book.
I agree that spell ranks shouldn't be used, in general they should just scale with level. Spells could also cap at different levels to give a range of options if needed depending on the spell casting resource system used to balance the game.
I definitely don't want to have to memorize or pre-select spells on my mage before heading out and into battle. I can understand it's use in D&D with hundreds of spells to choose from to balance the class, but since I doubt there'll be that many, I'd want some type of resource management system to balance the class. I'm not to picky about the specific system as long as it keeps magic use fun.