This doesn't solve the key distribution problem at all: To start off, both Alice and Bob must have their own slabs of diffusing glass and must physically meet

This doesn't solve the key distribution problem at all: To start off, both Alice and Bob must have their own slabs of diffusing glass and must physically meet to create a key for encoding a message later. Like any other OTP system, key distribution — ensuring that the parties who wish to communicate securely have a shared secret (or secrets in the case of OTP; the whole point of OTP is that a key is only used once) — is the weak point. Unlike many other OTP systems, this one requires a physical meeting, which, depending on your use-case for needing crypto in the first place, may be impossible, or deadly dangerous. At best, this complicates key compromise. EDIT: clarifying language.