IP Routing Question

[Monty J. Harder]

  Apropos of our impending presentation by the Cisco Kid...

  Promise me you won't laugh, but last week, when I was in my Win2K
Network/OS Essentials [MS 2151] class, I asked a question of the
instructor to which he couldn't give a satisfactory answer.  I had read
in a book about a subnetting situation in which many of the "subnets"
were in fact two-NIC links between routers.  The way the book had
presented the "solution", these nominal subnets required the same size
subnet mask as the bona fide subnets with actual boxen on them.  This
seemed like a horrible waste of IP addresses, that simply didn't have to
happen.  I now understand this to be a historical inadequacy of some
routers, and not inherent in IP v4 itself.  But I got to thinking (and we
all know how dangerous =that= is)....

  To keep it fairly simple, suppose I have the address space 123.0.0.0/8
to play with, and I'm starting with 4 subnets [123.x.0.0/16, where x is
subnet 1..4], and leaving open the option to extend this later.  I want a
hybrid mesh-star topology with each gateway cross-linked directly to the
other gateways.  This gives me a total of 10 subnets, the extra 6 being
the two-NIC links used to route traffic to the various Real Subnets.  Is
there any reason why these Nominal Subnets can't use private IP space? 
For illustrative purposes, and to canonicalize the addressing, the NICs
connecting subnets x and y (where x<y) could be 10.x.y.x and 10.x.y.y on
/30 subnets.  [Not that you'd likely want to do this in Real Life, but it
makes the example reasonably easy to follow].

  If you're reading this in a monospaced font, graphically:

              Internet
                 |
                 | 123.0.0.1/8
                 |
                 |
  123.1.0.1/16 ##### 10.1.2.1    10.1.2.2 ##### 123.2.0.1/16
+--+--+--+--+--# 1 #----------------------# 2 #--+--+--+--+--+
|  |  |  |  |  #####                      #####  |  |  |  |  |
|  |  |  |  |    |                      /  |    |  |  |  |  | 
|  |  |  |  |    |   ------    /------/   |    |  |  |  |  |
                 |  10.1.4.1   / 10.2.3.2  |
        10.1.3.1 |            /            | 10.2.4.2
                 |            /            |
        10.1.3.3 |  10.2.3.3 /   10.1.4.4  | 10.2.4.4
                 |   /------/    ------   |
                 |  /                      |
  123.3.0.1/16 #####                      ##### 123.4.0.1/16
+--+--+--+--+--# 3 #----------------------# 4 #--+--+--+--+--+
|  |  |  |  |  #####                      #####  |  |  |  |  |
|  |  |  |  |                                    |  |  |  |  | 
|  |  |  |  |                                    |  |  |  |  | 
                                                 |
                                             123.4.56.78
                                               [Target]

  If the route to 123.0.0.1/8 is advertised to the world, is there
anything preventing construction of local routing tables to get to the
target?  The only thing I can see this causing problems with is
traceroute, but since the questionable hop to Router 4 is to a machine
with a valid public IP, it ought to work, shouldn't it?
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