Thought I would report back on the results of the coaching situation, in case this can be of use to anyone else.
It looked like there were a few too many teams for my liking playing coach roulette. Didn't like the chances, so I signed the last available AAA PC, who is similar to my AA PC. This way I don't have to demote my prospects.
In the final cycle, there were three teams assigned ML PCs. They made out alright, getting low end big league coaches.
Three teams needed AAA PCs. They did not fare so well, they got low end AAA PCs. None of the ML coaches dropped down.
Because one of the teams' owners hasn't checked in for over a week, he missed coach hiring and all his franchise's coaches were assigned. So I was able to check the most important point - every coach in our world who was assigned appears to have been one who coached in past seasons, but were not under contract last season. It looks like the sim attempts to replenish the coach pool by bringing the unemployed guys back into it.
Is this a total surprise to you, or can it be explained just by the fact that our world's coaching pool is somewhat depleted at this time?