My suggestion to make it more smooth is, instead of a sharp one week bound, to gradually reduce character's attraction potential after a week of not logging in, to reach 0 after two weeks. A person not even checked for two weeks can be considered as not played at all and their ability to make a newspawn interested in is zero as well.
I really like the basic idea, and this is one of the best suggestions I've seen for how to handle it. A little sad my small town won't be able to use the strategy of collecting sleepers from the surrounding area, but it's better for everyone that characters spawn in places with other active characters.
I know you really can't go by polls here but it looks like plenty of people are in favor of the automatic system, they just voted for both instead of voting for it by itself.
Currently, characters (usually townleaders) are often feeding the sleepers in the location because the players know it's used in spawning algorithm. So even player of a cruel and selfish character needs to decide whether they should act OOC by feeding sleepers or be disadvantaged in comparison to other towns.
One town in particular comes to mind that fits this example exactly. There's something like forty people, most of them sleepers, and they're fed in a very calculated way to attract more newspawns, no one even pretending it's out of compassion. I'll see a new one pop up every day, sometimes even two, and they quickly fall asleep out of a lack of interest and options and join the horde to help attract even more.