I actually like this proposal quite a bit, because it fits in naturally with the naming system I designed, which has no central root server at all! It shouldn't be ICANN selling slots at all, but ISPs charging to advertise your name to the rest of the world with whatever funny suffix you want.
But we are still stuck with the problem of uniqueness. If I use my slot to sell ".biz" names, nobody else can simultaneously offer ".biz". Auerbach doesn't make clear (in this post) how we should arbitrate competing claims on character strings without falling back to the same problems we have now. First-come-first-serve may in fact be the best we can hope to do, with all its faults.