I disagree with this solution.
Firstly, any chance of stopping this situation where the worst 5-6 teams in the comp are uncompetitive is impossible as long as there are incentives for teams to finish low. Such incentives ruin the mentality of football teams and enter the subconscious of football departments, list builders and career coaches. As I always say - look at the NRL and how much more competitive it is than AFL. With a salary cap, but no draft. So there are only two conclusions:
1. The draft actually makes the league less competitive on a season by season basis.
2. AFL is a sport prone to blowouts due to the effect one player can have on a game, the relative freedom of teams to exploit lopsided matchups and the greater length of games.
So if 1, get rid or modify the draft.
If 2, we just have to live with it or cop a raft of rule changes like soccer did to stop lopsided scorelines with an offside rule.
But back to Popelord's suggestion, lets concede that the AFL is only really interested in the bottom line and the scheme will only work if it makes the AFL more successful in a commercial sense. Whilst your scheme might provide more competitive matches overall, which way would the average attendance go? What would be the effect, long-term, on the supporter and membership base of a club who spent many seasons in Div 2, further from the TV screens and back pages? Would the AFL be happy with there being no Essendon-Collingwood or Carlton-Collingwood or Richmond-Collingwood games next season if they finish in separate halves of the table? What would the attendance be between Richmond and Carlton if we were both in Div 2 and unable to win a flag that year? Halved?
Instead of asking a whole heap of questions about the commercial impact of such a scheme, you can probably save time and say that in the US, where the corporate $ rules, promotion and relegation as far as I know have not been considered and will not considered for their sports. Instead they use a series of regional divisions to maximise corporate opportunity and preserve rivalries. The promotion-relegation system is an artefact of 150 year-old soccer competitions in Europe, where whilst it adds a touch of romance and the chance of upward mobility to the sport, I think from a commercial point of view there would be plenty of powerbrokers who would like to see the back of it.
So I think it is entirely unlikely that such a scheme would get off the ground. From a supporters point of view I think there are plus and minus points. From a corporate point of view I think that there are more minuses than pluses. I am cynical about the power of fans to move the sport in any collectively agreeable direction and as such I think the corporate attitudes will rule.