Yes, that's the basic idea. You can think of plenty of different ways to implement it, the important point is the framework of a consensus ranking, as opposed to a W/L metric.
The notion of traded picks is a detail, and shouldn't be a distraction to the main point. Kind of like, if I said, "Hey, we ought to jump in the car and road trip to Austin for the next Kings game" the question is "should we go and do we have enough time to get there?" not "should we gas up in Phoenix or in Flagstaff?" We can work out the Phoenix/Flagstaff question once we've decided the trip is a good idea.
That's not to say that I haven't given traded picks some thought. My current thought is that what would get ranked would not be teams, but the picks themselves. So if the Thunder have three picks in an upcoming draft, they would be labeled OKC-A, OKC-B, and OKC-C. Teams could rank those wherever they wanted, as long as they keep the labeling. So, it could be [A-28, B-29, C-30], or it could be [B-5, A-17, C-24], whatever. And of course, the A pick is say one they got from HOU, and the B pick is their own, whatever.
That does lead to some complications. The value of a pick you trade for becomes tied to your OWN record and not to the record of the team who gave it away. That does potentially give strong teams a bit more leverage in selling off picks, because even if they end up good, the pick might have more value because the recipient is bad. But again, the rankers would know which teams have multiple picks, and adjust accordingly. Protected picks are also a bit complicated, but the scheme above works from a mechanistic point of view. The OKC/HOU-D pick which is protected top-8, gets ranked. If it ends up top-8 it goes to HOU, otherwise it goes to OKC. (Obviously both OKC and HOU would be ineligible to vote on this pick.) Careful thoughts about the implementation of protected picks might lead to the conclusion that if we adopted this system we should place restrictions on or even ban protections from traded picks, but again, that's a Phoenix/Flagstaff issue. If I say we should gas up in Phoenix and you say you wanted to gas up in Flagstaff so you're not going to go on the trip, well, you didn't really want to go on the trip, did you?