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I think people left due to content and other obnoxious things, and less over the wards. People would use an auction house if that is what they had to use, just like people use the market wards because that is what they have to use. Several other MMOs use AH and that is the only thing sitting in your favor. Lots of people are used to them. However, MW really are not that different and once they fix some of these things I think it could really be better.
Right I'm pretty much done now being as you seem to be completely bereft of common sense, however the reason why these games use an AH is because it's the most efficient way (read: most fun way because it gets you back to playing the actual game quickest) to support trade amongst players.
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. As of this review's publish time the system requires you to hire a retainer, an NPC that can be given items and set in an instanced market area. The idea is that other players will enter into this area, find your retainer, and then purchase items you put up for sale. Yet in practice it means there's a disorganized mess of NPC retainers standing around market areas with little indication of what's being sold.
Just plucked that out of IGN's review from 8 months ago, I left off the part where it talks about not being able to find items because obviously we can at least search now. However it does help to give an 'outsider' impression of the system.