I'll probably drop all this into a blog post into the next few days, but more thoughts:
On the question of whether Gau, Umaro, and Mog should be changed to AI-based strategy or just be controllable: why not both? Have them run on AI naturally, but introduce a Relic somewhere late in the WoB or early in the WoR that works similarly to the Fake Mustache and ALLOWS you to control them.
On the Auction House:
FF9 had an Auction House that actually behaved like an auction house; do it like that. Make players bid; place them up against simple AI behavior from townspeople; reward good betting strategies while keeping the results somewhat unpredictable. Maybe even have an online component to it, let players trade items -- you can put restrictions on it (like one purchase a day) if you really want to, but I wouldn't worry that much about people gaming it, really.
The joke events could still happen I guess, but limit them to once each.
And keep a high probability that the important items -- the two Espers and, provided we keep Gilgamesh, Excalipoor as well, shouldn't be too hard to get ahold of. It's okay to have some rare stuff in there -- maybe a very low probability of super-powerful, super-rare items like Economizers and Offerings showing up -- but I don't think any UNIQUE items should be such a bastard to get.
And while we're talking about rare items, having the Excalibur and other high-end equipment not show up until the very end of the game is dumb. It should be obtainable earlier.
(Making the player choose between Ragnarok the Esper and Ragnarok the Sword, while still allowing you to steal the sword from one of the Goddesses, is okay by me, though. ...but maybe make it not such a pain in the ass to get rare steals. Maybe do like the more recent games have done and allow monsters to carry multiple items so if you keep stealing for long enough you'll eventually get the rare one?)