What about name updates and stealing famous names from non profit websites. These might not be able to pay much but the names might still be of high value.
I think there should at least be namespaces for both ways of distribution.
What value is a famous name for a non-profit unless someone has a use for it? If I buy it, do not use it, and cannot sell it then I lose money. If I can use it to generate more money than the non-profit could with it, then I am actually doing more good for society than the so-called non-profit. Now obviously, I couldn't grab redcross and then operate a business called 'RedCross' without having trademark issues. Without the ability to use the name in a public, for-profit manner the name only really has as much value as RedCross is willing and able to pay for it.
Objectively you might be right but from a personal point of view it could still be pretty uncomfortable. I was in a situation like the one above some time ago and I would not have enjoyed anybody to be able to force me to pay a lot of money to keep my domain. What about small independent websites? They would be forced to be profitable.
Example:
http://blockchained.comImagine some large VC funded company wants to advertise on my site but I think they are a rip off and don't allow it. They pay some bucks and take over my site? No way would anybody in his right mind run a personal website on that system.
What about blackmailing for names? Pay me 1
BTC or I will steal your name. What about non domain namespaces like bonds, IDs etc?
I think it will be very difficult to make your system well balance. Also Namecoin is already working fine, just like the old domains: Squatters don't want to sit on domains. If someone has a proper use for a domain he can simply buy the domain from the squatter. The new owner can resell it if somebody should show up who wants to pay even more.
If at all I can only see it coming for new/expired domains not for renewing.