I personally wouldn't allow proxies. I've always thought escalation leagues were a way to get people to expand their collections, which they're not doing if they're proxying.
Escalation leagues will definitely be different with Malifaux, mainly because you can change your list depending on what strategy you get. So I guess you'd just have people pick a faction at the start and they'd have to stay in that faction.
I would also consider starting at a lower amount of points and increasing the limit every week, instead of every two. Five points only gives room for one model per escalation, which I would personally find a bit slow if you're only doing it every two weeks. Although, this could be offset by the fact that you're able to change your list based on strategy, so chances are you would be buying more than one model per week. So, yeah, I dunno...
Seeing as how I haven't played a Malifaux escalation league, feel free to ignore me. Just some ideas