The delegates will have to sell this BitUSD on the market to get BTS and then continue to fund the reserve pool. This is not an ideal situation because it takes the delegates 2 weeks to take any action. So I was proposing to automate the process of selling the BitUSD and funding the fee pool.
Automation would be ideal. Couldn't the transaction include operations to do the conversion via the market? For example, a fill-or-kill limit order asking for exactly the amount of BTS needed (in exchange for the BitAsset) to pay the transaction fee, where the proceeds from that immediately go to pay the fee. If the liquidity of the market suddenly becomes really bad since the transaction was created such that the full conversion cannot happen within the price limit, then the transaction becomes invalid. If the nodes reject transactions that would not be able to satisfy the fee with the state of the market at the end of the previous block (despite the risk of false positives), it could reduce the amount of invalid transactions that need to be processed in the inner single-threaded engine at the cost that users might need to be willing to accept a slightly higher limit price to get their transaction processed.
The clients could automatically modify any transactions that deal only with BitAssets to add this fill-or-kill limit order operation to pay the fee and make the process entirely transparent to the user. If the user had plain-text BTS in the account (and the client settings were set to prefer it, which would be the default), the client would prefer using BTS directly since it would make the transaction slightly cheaper. Otherwise, it would all still work without the user having to worry about manually converting the BitAssets to BTS.
Furthermore, this could be used as an alternative to the fee pools of privatized BitAssets and UIAs assuming the BTS/{BitAsset,UIA} market had sufficient liquidity. The client could even automatically calculate whether the fee pool conversion ratio set by the issuers was likely to be cheaper or more expensive compared to fill-or-kill limit order method and choose appropriately.