I've never really had an issue with the way in which Safari handles the URL bar in compact tab mode. I much prefer it over the 'Separated' tabs mode. Whilst I don't have any particular objection to the methods demonstrated that Orion might implement this, but in my opinion (you asked for feedback), I don't even think there is a problem that needs solving.
The biggest UI issue I have with Safari's Compact tabs, is the way the tab's icon is replaced by a close button. When moving my mouse to switch tabs I'm naturally drawn to the icon, and instinctively aim for it when moving my mouse pointer. As you might expect, I find myself constantly closing a tab instead of selecting it. I would rank this as being a far more important issue to resolve if implementing compact tabs in Orion.