Personally, I liked it, but it's different enough that most customers would probably hate it... And the restaurant definitely didn't like it. I could read it in their faces every time they brought the bill and explained the system. (I'm regular enough that they eventually stopped explaining, though.)
Other businesses have to deal with people just plain not understanding what's going on for a while. Many people here are so set in their ways that a small thing like "insert" instead of "swipe" is enough to confuse them to the point of having a bad shopping experience, which is obviously bad for business, not to mention how much longer it takes to check people out when they spend so long fiddling with the card machine.
Finally, neither the store nor the customer were responsible for fraud. With the credit card company taking the hit for that, there's very little incentive for them to change.
This is what [1] terms "Table pay", but it also gives "Tip Allowance", which seem to be the system you've described.
At least in Britain, before Chip+PIN cards (12 years ago), paying by card in a restaurant was considered somewhat risky — waiters weren't trusted not to clone the card. Perhaps that's why customers were happy to use "Table pay".
[1] http://www.emv-connection.com/managing-card-based-tip-and-gr...
I've certainly never seen an option like that in NL. The three common things I see here are 1) you say "make it amount X" before staff enters the amount in the terminal, 2) you leave some extra cash on the table after paying the normal amount with your card, 3) just don't tip (which is acceptable here since wages are decent enough).
Also there has been this idea that it's for other countries with worse comms networks and high fraud levels, despite the fraud actually being worsr in the US as skimming magnetic stripes is still viable.