I think this is a great idea, and have gone on at some length about it before (probably the thread that Draklar remembers).
I don\'t think we need to worry about characters losing all of their skills. First, make the decay slight, and second, put a cap on the decay. Make the maximum decay 25%, for example: say you trained to level 20; you will never fall below level 15. You don\'t forget everything you know, just the fine points that require constant reinforcement.
I think that unused skills should decline. If the skill is important to you, then use it on a regular (or semi-regular) basis, and you don\'t need to worry about anything. If you don\'t use a skill, then it probably isn\'t all that important to your character to have it.
The system we have now is set up so that eventually everyone becomes a superman. given enough time, you have no choice but to max out all of your skills, unless you choose not to train. This is as far from realism as anything in the game, and needs to be changed. If you want to be an expert swordsman, then you need to devote your time to swordfighting. You don\'t have time to become a miner or a blacksmith. You might have time to gain a basic understanding of these other skills, but it is impossible to become expert in all of them.