It's getting away from how the seats were designed to be used. In an accident it could be possible for things to shift and the seat to become loose. Or, if you have to stop fast or hit something now their heads could swing more. Like if you were in the passenger seat with the seat back trying to sleep, your torso can swing a lot further than if you're sitting upright.
I know you mean well, no one would purposely put their kids at risk but it doesn't sound like a good idea to me.
Just something to consider.
car seats are designed to protect children in high speed impacts, not for providing comfort and body support against random minor bumps and jolts in all different directions such as wheeling at less that 15 kph, where a high speed impact is completely impossible, so I would not immediately dismiss the idea that a alternate setup could be better for an alternate application. additionally, the rolled up towel or blanket is actually recommended by the carseat manufacturers as a method to adjust the cheaper non adjustable carseats to the proper angle where required in some vehicles. all I am talking about is adjusting it so it is angled a little more back than the suggested "ideal" position (for high speed collisions)
spinal guy, consider the implications of this before you dismiss it. no longer do you look back to see you kid's head drifting forward and have to stop and adjust them every time you hit a bump, hit the brakes or go down a hill. Instead they are leaned back just a few extra degrees and there head is supported. Additionally, they are protected more from impact up the spine through the seat from bumps and jolts. Kind of like how if you ride a bicycle with an upright "chair" position you can damage your spine from hitting bumps but with the leaned over forward position the impact does not travel straight up your spine (although you may strain the muscles in the back of the neck from trying to look where you're going)
If you want proof that this is way less traumatic for little necks and spines, go whelling with a kid in a carseat setup normally and observe as you drive on flats, uphill, and downhill. When you go uphill, the seat tilts back a little and the head never falls forward...the kid does not have to support hthe weight of his head against every bump. when you drive downhill the kid's head can tilt forward or to the side in what is obviously a painful or damaging posture. You can drive a mild uphill trail all day long and never see even a sleeping child's head fall forward even once...just tap the brakes gently on a downhill with a sleeping child and you can practically see the muscles tearing as their little head bobs and bounces forward.
as to this position in a front seat being dangerous for adults, there is no comparison...the chilren are in a 3-point harness which prevents them from sliding forward onder the belt as an adult would.
I am not suggesting anyone setup their carseat this way for the street but for wheeling I think it is a huge improvement.