Could all matter in a black hole be actually only on its surface (Schwarzschild radius)? Layman here, sorry if I miss something obvious.
Black hole entropy depends linearly on its surface. If all matter in a black hole would actually be located only on its surface (or very near), wouldn't it cause entropy to behave exactly like that?
My idea is that when new matter falls in a black hole all black hole matter gets displaced further from the center of the black hole. Somewhat akin to how gravitational waves can displace matter far away from black hole. In that way black hole interior is just a (topological) hole in fabric of the space time.
Does this idea violate any known physical laws?
 A: 
Black hole entropy depends linearly on its surface. If all matter in a black hole would actually be located only on its surface (or very near), wouldn't it cause entropy to behave exactly like that?

This doesn't really make sense, for a couple of reasons. (1) Once a chunk of matter has fallen into a black hole, we expect the black hole's entropy to remain constant from that time on. Therefore the location of the matter doesn't relate logically to the entropy. (2) In your proposed interpretation, you give no reason why the entropy per unit area should be fixed. In fact, the area of the event horizon is proportional to the square of the amount of matter that has fallen in, so by your interpretation, the entropy should be proportional to the square root of the area.
Another thing you need to realize is that if matter falls into a black hole, it doesn't make sense to discuss where the matter is "now." General relativity doesn't define simultaneity in a way that would make that meaningful. For more on this, see this answer: https://physics.stackexchange.com/a/146852/4552

Somewhat akin to how gravitational waves can displace matter far away from black hole.

Not sure what you mean by this. This sounds wrong.

In that way black hole interior is just a (topological) hole in fabric of the space time.

This is not an interpretation that fits very well with current ideas about relativity. For more details, see this question: Is it possible the space-time manifold itself could stop at a black hole's event horizon? Basically it's the singularity that we describe as a topological hole, not the entire interior.
A: i often get caught up thinking in limited dimensions when approaching a problem like this.  
having heard many analogies about this, one that concerns me, and possibly you, is that time slows ('you could watch the end of the universe') or stops near the event horizon.
so occam's razor says; if time stops, does matter move?  can it fall into a black hole?
