Straw man, again. I never said anything remotely like "all demoted players take a demotion penalty." I said you risk up to 2 penalties, which is true.
Further, the 10-day stint in the minors means that, while your very low dur/sta guys might become a bit more useful, it's not like you can just grab 2 of these guys and swap then out every 3 days.
Additionally, it's not like "having a 26th man" until you have two guys who have both been exposed to up to 2 demotion penalties, both of whom still have options. And even then, you can only swap them out for each other, and they can never both be in the bigs at the same time.
And you've yet to deal with the fact that it's something that requires options.
Your statement that this is basically a Major League inactive list or a 26th roster spot is one of those ideas that sounds true, until you spend 15 seconds thinking through the ramifications. Functionally, this is much less useful than a 26th roster spot or a BL inactive list. It's also only slightly more useful than what we have now, where you can make all of the same roster moves, you just risk more than 2 demotion penalties in a season.
Then again, that was long so you probably didn't read it.