The reason the HST is in orbit is to overcome atmospheric distortion. That is true. However, I was simply pointing out that we have birds up there that have VERY elaborate optics, perhaps more so than the HST. Although the HST is taking advantage of the fact that it doesn't have to contend with the Earth's atmosphere, its optical capabilities are extraordinary.
You are correct, we do have LEOsat birds with very good optics, however due to the nature of their orbit, they cannot remain on station for the duration you would require. Add to that the need for clear air (clouds really mess up satty pictures), and the limited field of view you get as you zoom in to get more detail and you would be better off using UAVs which can loiter a lot cheaper and at lower altitudes with the ability to have their payload retasked rather quickly.
The bulk of your idea is sound IMO. Just my $0.02