Shelley,
You describe a special situation that seems to have worked well for your program. The type of position assigned to the graduate is a factor in the decision as well. In my experience, I would see campuses hire grads to teach as soon as they graduated. We in the for profit sector have always prided ourselves on the fact that our faculty bring "real world" experience to the classroom. If they have not been out in the "real world," they don't have much to share with the current students. Your situation seems like it might be quite different than what I describe and does serve a particular purpose.
Dr. Patricia Kapper