Right now I would say that Minnesota, LA, and Milwaukee would be my top choices. And since it is a fantasy draft, you should obviously take major league ballparks into account...and LA has the pitching prospects and the park to possibly take them #1.
I must say that I really like this idea though. Kudos to whoever thought of it.
As for question #2, for the most part (though not always), the small market teams are the ones that hold onto their prospects and trade for others because once their stars hit free agency, they trade them to the teams with money (or that spend it anyway) and take their prospects. Teams like Minnesota and Florida are good examples of this I think. And Seth Trachman at Sportsblurb.com does a good job with prospect reports at no fee.