Okay, I have tested and validated what happens so I can clear the air here. I'll explain how it works in detail first, and then how it has been applied to Blitz/GDL leagues.
The Detail
You can set the lines for Sc1, Sc2, Chk, PP1, PP2, PK1, and PK2 in NOSE. When you play a game with no line changes (assume Sc1 = NLC), the sub that comes in for each position will be the next player in that position on the next line in the order I referenced before.
So for example, if your Sc1 Center gets injured or gets a penalty, the player that comes in will be the Sc2 center. If that player is unavailable (already on ice or injured), the Chk center goes in, etc. and that progression follows all the way down to PK2. So the replacement logic for the C is initially:
Sc1-C --> Sc2-C --> Chk-C --> PP1-C --> PP2-C --> PK1-C --> PK2-C
And this is true for all positions.
Sc1-LW --> Sc2-LW --> Chk-LW --> PP1-LW --> PP2-LW --> PK1-LW --> PK2-LW
Sc1-RW --> Sc2-RW --> Chk-RW --> PP1-RW --> PP2-RW --> PK1-RW --> PK2-RW (yes, there is a PK-RW that you have to set in NOSE even though that person never plays!)
Sc1-C --> Sc2-C --> Chk-C --> PP1-C --> PP2-C --> PK1-C --> PK2-C
Sc1-RD --> Sc2-RD --> Chk-RD --> PP1-RD --> PP2-RD --> PK1-RD --> PK2-RD
Sc1-LD --> Sc2-LD --> Chk-LD --> PP1-LD --> PP2-LD --> PK1-LD --> PK2-LD
Now, what happens after you exhaust those options (i.e. you have the same setup for each line)?
After the Center options are done, the next player is the available LW (in the same order as referenced above...Sc1-LW, Sc2-LW,Chk-LW...). After that goes the RW.
The sequence for the other positions is
C-->LW-->RW
LW-->RW-->C
RW --> LW
LD --> RD --> LW
RD --> LD --> LW
Again, each of those positions goes down each line (Sc1,Sc2,Chk,PP1,PP2,PK1,PK2)
How does this work in Blitz/GDL?
Well, to simplify the process, we set Sc1 and Sc2, and leave Chk,PP1,PP2,PK1,PK2 equal to SC1. In effect, leaving only 2 lines and asking people to just post those two lines. To post everything else would be time consuming, overkill and confusing.
So how do I set a 3rd defensemen to come in for either my LD or RD? Let's say you had your starting two defensemen (Def 1 and Def 2) and you wanted Def 3 to come in for either. This is the lineup that should be set:
Sc1 - LD Def 1 RD Def 2
Sc2 - LD Def 3 RD Def 2
Chk - LD Def 4 RD Def 3
(remaining lines - PP1,PP2,PK1,PK2 set to Sc1)
SO,
If Def 1 (Sc1-LD) gets a penalty, the next LD available comes in and that is Sc2-LD, or Def 3. Check!
If Def 2 (Sc1-RD) gets a penalty, the next RD available comes in. Sc2-RD is Def 2, who is unavailable because he just got a penalty, so the next available is Chk-RD, or Def 3. Check!
In that same scenario, if two defensmen get a penalty, Def 4 makes his appearance. You can do the progression in your head, but essentially everyone in unavailable until it gets to him.
So in order to have that work, the lines in the ROM for defensemen should include Chk, or we ask people to post "defensemen to come in for either LD/RD" if they don't want to list the other two in Sc2 and the person making the ROM uses the lineup above.
Happy to clear up any questions as I feel like I have a pretty good grasp of this now.