I have just realised a flaw in this that noone else seems to have commented on. Its an unlikely scenario, but nonetheless it could happen, even if not to the full degree.
Lets say a club like Arsenal name a squad of 25 that includes the maximum 17 foreigners, who are all relatively young and they develop enough youngsters that they have 8 homegrown players that have come thru their own academy, who make the full squad at the age of 20.
Lets say they win the league with that squad, which meets all the criteria as laid down by the new regs, the following season they could not name the same squad as their 8 homegrown players are now 21. So a squad which is legal one year might not be the following year. That is just crazy!