My grammar book said, replace the previous phrase/clause/sentence with "this" or "that" in order to avoid repetition. Then the book provides with several examples without any notes.
I agree with you to use the concept of "distance in time" to distinguish between these demonstrative pronouns. I come up of a question now,
1(a)He promised to pay his debt. ______ he did on the following day.
1(b)He promised to pay his debt. He did ______on the following day.
This is my idea.
1(a)--> This ( it's close to the previous VP)
1(b)--> That ( it's a bit far way from the previous VP)
What do you say?
I am not sure what you mean by VP, but I would only use "this" in the first person, present tense. I would also have to be quite close to what I am referring to. For example, if I say "This is a good place to live" I am at that place. If I say "That is a good place to live" I am not at the place I am referring to.