IMO when a team is in it's down-cycle the goal is to build and properly develop a new core of elite talent. The "Rebuild" model you describe is something that teams in the NHL are avoiding because of the lottery changes and the poor environment it creates for player development. In fact I think it was Bob Mckenzie who said a "Rebuild" similar to the Canucks model is where teams are going. Keep first round picks, bring in characters players to teach and insulate the younger players. Many quality free agents avoid rebuilding teams, so you have to trade for these character players. And since you are rebuilding team, you likely don't have many quality assets to trade so you resort to trading lower draft picks.
Also this isn't the first time I heard this "sign players to cheap 1- year "show me" contracts which can easily be flipped at the deadline for more picks" . It was ridiculous the first time I heard it on HFboards and it's ridiculous to hear it now. Most players that can be "flipped" at the deadline are not going to sign 1 year contracts let alone sign a 1 year contract with a rebuilding terrible team. Yes, there are some examples of this, but it's pretty rare, and it's definitely not frequent enough to be a integral part of a rebuild model.