At one point, I had started work on such a system, but I accidentally wiped it out. The biggest issue is with demotions. A user's activity only gets updated when they visit or when their posts or profile is viewed. This means that it's possible to come back after a month of inactivity and have the old usergroup untill the next time promotions are run. It is, of course, possible to just do activity for everyone at once, however the process would be very server intensive, which is why I do it the way it is now.
Glad to hear that you got it sorted out on your own; sorry I hadn't gotten the chance to look into it for you yet.
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