I'll agree with jail time for the first offense (and ever other one) but permanently taking the license just leaves these people unemployable and a drain on the rest of us. they usually just end up driving anyway(I know a few of these, too damn many really), and since they have no license they don't have insurance and most drive dangerouse POS cars so they don't take too much of a hit when it's towed away, and they just keep on drinking and driving. I worked with a guy about 18 months ago that got his 6th in Oregon (he wasn't sure how many he had total since he travels the country).
the thing is it's not a driving problem but a drinking problem.
I'd think a reasonable solution (I wouldn't expect it to actually solve the problem, but I'd expect it to make a dent), would be to add a "drinking license" endorsment on your license or IDcard. just like they have now to say if you can ride a bike or if you need glasses or other restrictions.
when someone drives drunk pull their drinking license for a time (among the other penalties). everybody would get carded no matter how old (this would also help with under age drinking since everyone gets carded, nobody slips by if they look older than they are).
if you serve alcohol to someone who isn't legal, then you get hit just as if you served to a minor.
I wouldn't think it would cost much since it would just be something that showed up on your license when you turned 21, and revoking it would be no more expensive or troublesome than suspending the license (which we do now anyway), it would probably be easier, adn cheaper since you wouldn't have to worry about insurance and sr-22 filings to reinstate.