Assuming I've understood the proposition correctly, I don't think that what is being suggested in the OP will actually help to narrow the spreads. If it were possible, then any stock exchange for example could simply offer cross-stock trades (creating the required triangularities) to improve the liquidity and spreads in each of its stock listings.
Instead what I think would happen is that all three pairs would trade at spreads, and the cost of trading around the triangle would limit arbitrage as before. Eg if you created a market in BTC/USD and got hit on your buy BTC / sell USD order, you could not simultaneously sell BTC for BTS and buy USD for BTS without incurring the spread costs in those markets, meaning the arbitrage is ineffective. Instead you would need to wait to get hit on those positions at market or better, in which case you are simply assuming the risk of the market-maker.