I like the concept, but personally I see the decentralised nature of the Fediverse as a benefit rather than a hindrance, and moving all identity functionality to a centralised system would create more problems than it solves.

Suddenly you’ll have a single point of failure for the entire Fediverse. A very appetising target for hackers and DDOS attacks.

An alternative that’s in the spirit of your idea would be to allow for auth delegation, i.e. if you sign in with an Activitypub ID rather than a plain username, redirect to that instance to sign in then redirect back to the instance you started from, auth token in hand.

The nice thing about this approach is it’s basically just OAuth 2. It’s familiar, simple to implement and built in to a lot of web frameworks already. The only extra step would be advertising the server’s auth URL via the nodeinfo endpoint, which is fairly trivial to do.