People wont walk away with licenses at the end of their transactions, as they do now. Instead, they will get paper certificates saying they are licensed to drive; their actual licenses will be mailed to them.
The weakness in the system is the human element. What happens if the license gets lost in the mail? What happens if the official documents are in fact fraudulent (really good fakes) that the DMV employee is unable to verify as such?
Some one is going to crack the system. And, at the same time, the temptation for the Federal government or the States to use such a massive database for potentially nefarious purposes, or even simply allowing third parties to access records, for a fee, is much too great.