Strikeforce tried and I think a combination of today's fighter and rash of injury pull-outs would make it all but impossible. Look at DC, while I have no doubts the tournament would have went the same even he was a replacement. How great would it be for in the semi-finals we have some no-name replacement win and end up with a title shot? The answer is it would probably not be great at all.
But to my main point, today's fighter. While it is good that fighters are now starting to ask for their "brand" (which is their image) to be respected, how much would it suck in a tournament format? Lets ask Overeem, he clearly didn't give a sh*t and just dropped out. There would be fighters as they start making it into later rounds of the tournament that might think it is the perfect time to renegotiate their contract. Or what about fighters who contracts actually do happen to run out during the tournament?
Injury prone fighters/champs is a big deal as well. Cruz finally had to be stripped, Pettis has yet to defend his title, WW division was basically a standstill while GSP fixed his knee, and Cain has to keep delaying his fights. That is just the champions! UFC cards right now change so often I think we should now be able to bet on which fights actually happen on a card on vbookie.
Tournaments are an EXCELLENT idea, but in application they would be more trouble than they are worth.