[dns-wg] Elimination of 2nd level ccTLD domain names

I'm new to this particular WG but I'd like to raise an issue that I feel is 
best discussed in a European DNS forum.  It has to do with .eu:
<http://europa.eu.int/information_society/newsroom/cf/itemlongdetail.cfm?item_id=1383>

According to my understanding, there will be direct 2nd level domains - 
like ibm.eu or ripe.eu or even tonyblair.eu.  Up till now, most countries 
employed a hierarchical structure such as ac.xx or co.xx or org.xx.

What do we lose by eliminating 2nd level domains?  Since .eu is a totally 
new TLD - perhaps not much, but what happens to countries that then decide 
to follow the same path as Singapore recently did (they are cc'ed to this 
email):
http://www.nic.net.sg/newsroom/20040816030345.html

Are there any limitations to what a 2nd level domain name can be (not 
referring to trademarks)?  I.e. would a single digit or letter be 
allowed?  Would co.sg be allowed (up till now com.sg was the main 
commercial 2nd level domain)?

Are other countries considering following the same path?

Thanks,
Hank