This auction idea is brilliant, and exactly what the league needs, in my opinion. Whoever came up with that stupid assigned salary idea was an idiot
I would agree that emergency signings should probably go into a free agent auction. Perhaps a less cluttered way to handle free agency, though, rather than holding another auction every Sunday or whatever, is a kind of waiver system.
For example, an owner wants to sign a player, they make their intent known to the other owners, and an auction begins specific to that player. The owners then have X amount of days to bid on the free agent in question before he's actually signed to a team. So rather than waiting to sign your free agent until bidding day, you open the bidding as soon as you decide you want them. This could also be rolled into the emergency signings subject; the player could play for the team that opened the bidding on him until bidding is closed, at which point he goes to the highest bidder. Might force owners to be a little more active, but I'd argue that's a positive.
Might I also suggest, in the interest of speeding up the draft process, a secret auction system? Each owner bids the maximum value they think a player is worth to them (or the max they can afford), and the highest bidder is ultimately charged $1 above the second highest bid. That way instead of having to wait for things to go back and forth until they reach the appropriate value, owners only have to bid once per player.
Example: Maha opens bidding on Guerrilla
All owners submit their bids, nobody knows what anyone else is bidding.
Maha had the top bid at $70, but the second bid was $60. Maha signs Guerrilla for $61. (I'm assuming a 200/1 system in this example; smaller numbers make more sense to my brain, even if multiples of 10 are easier to associate with a percentage. Why set a minimum of 5 when you can divide by 5 to set the minimum at 1? Small numbers are easier, in my opinion.)
Different system, but I think it'd achieve essentially the same results slightly quicker. Granted, it adds more personnel, because some impartial third party has to supervise it, but that can't be too tough.