Interesting idea but there's the issue of similar sounding words when communicating orally. "gab, with a 'b' or gap, with a 'p'?". There's a number of these occurrences in this word list.
An alternative is Oren Tirosh's mnemonic encoding [0] project. It has 1633 words that were chosen specifically because they are short (4-7 characters), phonetically different, easy to understand over the phone, and recognizable internationally.
[0]: http://web.archive.org/web/20090918202746/http://tothink.com...