Personally, root tabs are grouped naturally by topics / tasks, since they would be spawed by creating a new tab and searching via a search engine, or going to a website that is unrelated to what the user is currently doing.
I see the close button as currently doing 2 actions - closing the tab, and making all the children a child of the parent. I think this is unexpected and would probably be more confusing.
The typical behavior of recursive structures (e.g. folders) with regards to delete operations is usually that it will affect the children as well, and users are relatively well trained to move it somewhere else if it valuable. In this scenario, it would be to move the valuable sub-tree to the root or into bookmarks.
Finally, I think that it probably makes sense to consider alongside other UX features. For example, as a user, it is quite hard to promote a sub-tree to the root manually right now, as dragging left (i.e. decreasing the indent) doesn't move the sub-tree up. So users might be using close as a proxy to preserve a tab tree that they want to keep.
