Diablo 3 Release Date

Did I state that they would allow items to transition from one to the other?

Nope, but your supposition that the item sink of hardcore would balance the market would seem to imply that that was what you were suggesting. Otherwise hardcore isn't even going to change the softcore market, regardless of whether or not the auction house is separated. Hardcore would only serve as an item sink for hardcore items, doing nothing to help the fact that softcore items are flooding the market.