I think candidates might be reluctant to do this, since it could be seen as an admission that the candidate thinks they might not win (although personally I would view a candidate as being arrogant and complacent if they couldn't imagine losing).

You're probably right, though, that candidates should be forced to do this, and maybe they should be able to choose whether or not to disclose their preference in advance to potential voters. If they opt to keep it secret and they win, then their preference never has to be revealed, and if they are eliminated then only their highest remaining preference is revealed.

Admittedly I haven't proved that there aren't times when a candidate may need to tactically reorder their preferences based on the actual distribution of votes, but I can't think of a situation where they wouldn't want to re-assign their votes to the candidate whose values are most similar to theirs / their voters.

I like this and would like to see someone work out its implications. Otherwise, asset voting just seems like a way that campaign funders could stuff 13 straw candidates on the ballot with positions tangled enough to dilute the support of 2-3 threatening candidates (threatening to a particular policy, for example), then after the vote the straw candidates all fall and throw their votes to Mussolini, Jr..

That's an interesting theoretical attack that I hadn't considered, thank you for sharing it.

I think a possible rule to defend against it would be to mandate that any political party needs to have received at least 5% of the popular vote in that local region in the previous local elections in order to be eligible to stand candidates for the national congress/parliament.

If a candidate wants to stand without the backing of any political party, they would need to receive at least 20% of the (first round) votes in their district in order to win (without needing to stand in the local elections first).

Forcing candidates to publish their vote assignments at registration time might be the way to go, though, as it would help to expose these straw candidates, and also mean that the candidates wouldn't have to be present when the voting result is announced.

To avoid embarrassment, candidates could place a "null" option in their lists, meaning "If I am eliminated, then discard all the votes I received (including the votes assigned to me from earlier-eliminated candidates) and let the remaining candidates win or lose based on the remaining votes".