Not bad, but I could see that creating passwords that are too long for some systems, and it would be vulnerable to dictionary attacks. Also, what would you do when the site requires a password reset?
Maybe do your strat, but only do every other, or every 3rd letter as a short word, and use a Caesar cipher, incrementing the cipher once each time you have to reset? Sounds kinda fun, but I don’t think most sane people would do that… Open to ideas though.