I have a different thumb rule for this issue:
I take the average of a nightly rate I'm used to spend and compare it to the rate in question - if this rate is much higher than my average than I'd prefer spending the points, especially if it's a very expensive rate which can be found in luxury hotels & resorts.
I regret that I may be one of those that caused your head to spin... Sorry
I would always redeem a night that costs $150(inc taxes) or more for 10,000 points. If I was heavy on points and light on cash I might use 15,000 points. I would never consider redeeming 20,000 points for a room at that price.
My minimum redemption target (inc taxes) goes
Cat 1 $75
Cat 2 $100
Cat 3 $150
Cat 4 $200
Cat 5 $250
Cat 6 $300
Cat 7 $350
Cat 8 $400
Cat 9 $450
In other words 1UScent per point. Note you can do better than these, popular times can see a redeemable cat 5 hotel room sell at $400, a cat 9 at $700. If you've got hundreds of thousands of points a Marriott Travel package can be a good idea, I recently redeemed 360,000 points for first class return tickets UK to Miami and 7 nights in the Florida Keys. The cash price was $7,500 (inc taxes), a return of 2.1UScents per point. More prosaically, last year I redeemed 400,000 points on a family roadtrip staying at Marriotts in Ottawa, Albany, New York, Oakville and Toronto for a total of 13 room-nights worth $5,300 (inc taxes), a return of 1.3UScents per point.
As usual, Bob, you have provided needed light to a murky subject. I have been collecting points and not using them while I'm working, but as I'm not approaching retirement, I'm getting to the point where I'll be using them. I will keep your calculations and suggestions in mind. My beloved and I thank you!