I don't pretend to be an expert, but I think there is some validity in this new approach. There are plenty of countries with good gymnasts who probably don't qualify to send a team but are on the cusp of producing an individual athlete that could be competitive. New Zealand is one example. Their population would make it difficult to compete with the stronger countries, but as their program develops, they will have one or two gymnasts that have Olympic-worthy skills.
I can't see how this is different to swimming, track and field, triathalon etc. How many times would there be a top 10 athlete in the world watching because they are the the third or 4th best in their country. It often happens for Australian and American swimmers, and I'm sure it happens for Jamaicans on the track, as well as some athletes in the veladrome. The Olympics is about participation and promoting sport, not just about having the best of the best compete.