It was never billed as a silver drain. Wyrom has repeatedly stated that they are unable to envision any sort of silver drain that isn't tedium incarnate. This is the "Great Silvers auction of 2016" repackaged. The W/P/S blacksmith being open and unlimited (which it should be all the time anyway) will be the strongest draw. As Alastir stated, the prices for work will most likely be scaling based on the item and highly inflated, just as they would be during any other raffle win. The biggest difference is the amount being offered at one time and the elevated possibility of being selected.
I saw a few mentions of a punitive effect for passing items but not the specifics, can anyone post exactly what would happen?
It looks like a few interesting items will be let loose but it's mostly just a chance to upgrade items with silvers (if you are lucky) instead of having to buy your way through them in Duskruin. A couple of people will make a few bucks selling silvers at the temporarily inflated values before they crash back down to earth. This is a classic dead cat bounce. Without a stable use for silvers the market will continue to fluctuate heavily. A good amount of people may get a tier upgrade on a project piece and make something fun or interesting but most will be priced out. That's just how things tend to work though so no preventing that. The event will be used as an example of "see, we did stuff for silvers and not just simucoins!" and the status quo will continue on. It's neither good nor bad, it simply just "is".