The purpose of the DIII idea is to reduce the number of trips to back and forth to town, and the clogging of the inventory with potions. With the potions system, it just means you have to keep looking at your health gauge and press a key at the proper time to heal. Health "power-ups" (orbs dropped by enemy) sure sound absurd and "unrealistic", but I think it'll be an interesting change of pace for the game.
I mean, potions are okay for a game where you actually think about it when you use them. A more "RPG-ish" RPG like Morrowind, you had all sorts of potions, including health. Potions was a skill. In diablo, potions were more like a "heal me now" key you could press as much as you want because potions cost nothing anyway. And you could easily drink up 10-20 potions per minute when the difficulty was up.
So yeah, orbs of health for an "action-RPG" are fine by me.