I played diablo 2 before WoW where the only option was to spam 50 different chat channels with buy and sell messages over and over for hours. Removing the AH would be a dealbreaker to me I think.
The AH was really the only 'sane' solution back then when the MMO era was about to explode, having un-instanced shops takes space, and instanced ones break immersion (look at player garrisons), the auction house solved that.
Having thousands of requests to buy would flood any dedicated trade chat (just look at Diablo 2 trade channels in 1999-2000, and that was only a fraction of requests) where chat would flow faster than human readability, the auction house solved that.
Having to waste time browsing player shops, instanced or not, for the items you seek instead of a single search bar to look for a specific item, again the auction house solved that.
Having player shops/stalls is a faux romanticised solution - with spamming trade chats being no solution at all - that in the end would be too cumbersome to use, whilst the AH still keeps immersion to a satisfactory degree (it helps that it's an actual physical location unlike Diablo III's was).
It is widely acceptable that if you go out shopping for something specific, or just general goods, you might be out the house anything from 30 minutes to 2 or 3 hours. However it's unreasonable to expect people to want that type of borderline annoying inconvenience from a game for the sake of immersion. The AH was a stupendous idea, and it shows. I'm happy to visit Stormwind's streets for my shopping immersion fix. :mrgreen:
Dumbest idea I think I've read so far.