This is an interesting idea. I would certainly like to see something to make armor class relevant at high levels, but... it really seems like it just plain doesn't. And either shouldn't, or ... I'm getting ahead of myself.
On the one hand, yes, AC becomes completely irrelevant at higher levels once AC either caps out (i.e. you can't get bigger bonuses) or becomes so offensively expensive that you just plain can't be arsed, and either way Displacement is just better. There are two causes of this: AC being both limited (bonuses don't get any bigger) and hampered (bigger bonuses get expensive fast), and the fact that BAB (for you, but more importantly for the bad guys) scaled with HD while AC doesn't and certain truly nasty bad guys rely on having piles of HD to be substantial threats (Famine Spirit, anyone?).
What this means is that above certain levels, the simple fact that attack bonuses scale with level while AC doesn't makes AC irrelevant above a certain point. (I don't honestly know what that point IS - in my experience it hovers somewhere between level 12 and level 16, but is almost certainly true by level 20 and truer the more epic you go.)
The problem I encounter every time I sit down to try to fix it is... what happens if I succeed? That is, what does it do to the game if you actually balance this? The simple fix, after all, is to give everyone an AC bonus that scales with level, perhaps equal to their BAB. ... But wait, wouldn't the end result of THAT be that the bad guys more or less have to roll a 10 to hit you, no matter what your level is?
While it might not be THAT strict a thing, or that watery a thing, I think that does become a real problem when trying to correct this. You go from AC itself as a concept being irrelevant at high levels (because they're going to hit you; you're just better off not being there when they do), to AC as a concept being relevant but the actual numbers thereof mattering more or less not at all (because they're going to hit you on a ten or better, unless you're doing it wrong, in which case, see above).
Doesn't that sort of steal the thunder out of having a jacked-up AC at all? Knowing that in a couple of levels you're to have to keep reinvesting it in in order to stay on par, while the guy who bought a cloak of displacement (or just casts a persistent displacement every day) will have the same 20% or 50% miss chance from now until forever, and the things that can challenge him (anything with true seeing) will wallop you (because they're probably casters)?