So agreed you shouldn't change rules mid-season.
As for the "right" thing to do going forward in future years. What my keeper (baseball) league used to do was to say: if a player is dropped and clears waivers, then their cost resets. In your case, that would probably be analogous to setting their cost to $5 if they clear waivers. On the other hand, if a player is claimed off of waivers, then the new owner would take on their existing cost. Now. In your case I'm not sure what that means if a player could be bought at auction for $3 then dropped. If they clear waivers, their value would actually go *up* to $5, which seems odd.
The other thing I can note is that my league no longer does this heh... it led to a strange dynamic at times. An "unprotectable" expensive player is dropped. But that player would be really interesting the next year if their cost was reset. So it becomes a game of chicken. Either somebody claims that player off waivers just to stop the madness, or it becomes the "who can stay up late" contest to see who nabs the player when they become a free agent and their value suddenly skyrockets. I don't think I could point to any case where someone got a really valuable player in this way, but it was stressing people out.