I think the system of changing your initiative to right before whoever knocked you out is interesting, but not without flaws. It's fine when it happens once, but in the first module, every single PC in my group ended up getting knocked out by the BBEG. That meant that by the end of the battle the initiative order had changed to:
It's probably okay for groups who play with cards for initiative, but we put order on a whiteboard. Constantly reordering is a huge pain in the butt.