Being a commissioner for multiple leagues over a span of 15+ years, this IS the stupidest rule I've ever encountered.
As for the situation, if I'm reading that rule correctly, he DID NOT have a substitute on his bench (Romo had already played so could not be considered a substitute), so he was within the rules to make the transaction and pick up another QB.
Would your league have also voted the move to be illegal had he had a different QB, that person had gotten into a serious auto accident on Saturday night and wasn't available to play on Sunday. Would he not be allowed to pick someone up Sunday Morning to play?
I'm also curious as to the purpose behind this rule. What is it trying to accomplish and/or prevent?