Drew,
I don't think TIPS are a good investment for an emergency fund for two reasons.
First, part of the return you get from TIPS is "phantom income"--- its the increase in value of the security you get from the CPI adjustment and it isn't paid in cash. It is, however, considered taxable income. So you can end up paying taxes using money from other sources. That hardly fits an emergency fund. It's also why most advisors suggest that TIPS be held in tax-deferred accounts.
Second, when you invest in short term TIPS there is virtually no premium over the CPI adjustment. That may still get you a good return relative to regular Treasury bills, but it aggravates the phantom income tax issue. You only get a substantial (nearly 200 basis points) premium over the CPI by investing long term. You don't want to do that with emergency fund dollars.
With $50,000, however, you can do nicely by holding a short term Treasury ETF such as BIL (SPDR 1-3 month Treasury bill). It currently yields 3.3 percent. While you will have to pay a commission to buy shares and another to sell, discount commissions of $10 make that reasonable for larger sums. With an expense ratio of only 0.14 percent, it has very low costs compared to most broker platform money market accounts.
Here's the link to BIL on Yahoo: http://finance.yahoo.com/q?s=bil
Scott
