Earlier quoted context omitted.
On the face of it, it sounds simple enough: special treatment when the IP address is an IETF-designated private IPv4 address (e.g. 192.168.x.y). Is there some reason this wouldn't work, that I haven't thought of?
well, rfc1918 addresses just specify which ranges should not be advertised into the default free zone. (aka, the internet routing table). It says nothing about if a network is LAN or not. One could totally build a network with globally routed addresses, and not announce those addresses to the rest of the world.
Could, and people do; I've worked on networks where the original people must have misunderstood networking and did the equivalent of using 10.0.0.0/8, 11.0.0.0/8, 12.0.0.0/8 for internal networks, including public /8s they didn't own, so they lost access to one or two chunks of the internet - and it never seemed to cause all that many problems for them working this way (so no motivation to do a big involved risky rework-everything project). We added new private network subnets for new build things, but never swapped everything over. It'll phase out eventually I guess.