No, you aren't misunderstanding it. It kinda stinks. (lol)
One other awspect, in fact, that you didn't mention was that (A) it's not a grapple attack, but a product of a successful grapple opposed roll with the opponent and (B) it only lasts one round (ROK pg189). So, in essence, to get a choke, you have to successfully grapple your opponent (opposed STR test after a successful unarmed strike) and then you simply state you are doing the choke. On your opponent's turn after he's been grappled, he can make an Escape Hold action and not provoke and AOO (?!?), thuse forcing another grapple roll-off. Then on your turn again that same round, you have to make another roll-off and win to declare 1 more choke round. And so on...
...not worth it.
If the Save were immediate with each successive successful hold and choke round (eg. First round: DC10+STRmod+0. Second round: DC10+STRmod+1. etc.) then choking can force the individual to pass out without reaching the CON limit in rounds.
Curiously, even though it says one can hold one's breath for CONx2 rounds, there's no indiation of if that's a Full or Half round or Move equivalent or what kind of action. It matters, right? I'd suggest holding one's breath is a Standard Action because other wisde you wouldn't be able to Swim (move) and hold your breath. Duh, right? SO...long way to getting to my next point...holding one's breath would be in lieu of Attacking, which makes the Feat a little better (the held and choked opponent can't attack back while holding his breath) but it still makes the choker a sitting duck for all the other baddies around.
I would suggest the virtual damage by as follows along with the modified DC rules I stated above:
The held and choked individual can only hold his breath for CONx1 rounds while being choked. This number of rounds is diminished, however, at a rate equal to the attacker's STR modifier. So a STR16 (+3) person choking someone with a CON18 (can hold his breath for 18 rounds while being choked normally) would actually be losing rounds 3 at a time due to the attackers STR bonus, leaving him able to hold his breath for only 6 rounds instead (18 ÷ 3 = 6). Once these 'rounds' are depleted, the victim must make a FORT save DC10+ Attacker STR bonus + number of rounds choked or immediatly drop to -1 HP and be considered dying. The attacker is them free to Coups De Gras or leave the victim to die in due course, or to stabilize them at 0 HP and unconciousness, the choice is left to the attacker.
That's tough, and a little complicated, but it makes getting choked by really strong guys take all of a few seconds. Someone with STR22(+6) could choke that 18CON guy to death in 3 rounds, forcing him to make a DC10+6+3 test, or DC19. If he passes, then the next round of choking would be at DC20 and so on. Negative STR mods would be simply treated as zero offering no additional effect to the choke.
Really, with how devestating that is, you could leave the Holding Breath rules at CONx2 since really strong guys will deplete the rounds so quickly regardless (STR22 choking CON18 in that case could choke him to death in 6 rounds).