At a basic level, your logic is sound and I agree.
The problem that has arisen for Turdbine is the power void.
TR'ing was an excellent idea to maximise the utilisation of content - incentivising replayability took the pressure off endless content releases and racing towards having 100 levels.
The reality with a declining population in an MMO is keeping people playing together. Not everyone will play together, but the basic premise is that of a social one otherwise the game will lose its "feel".
The declining qty of LFM's should be a significant concern for any MMO Producer and is probably why the latest group dynamic changes have been implemented.
So the power void is a two fold one. The first is common to many MMO's - gear. The second is innate power such TR and ED's.
Combined, the effect is amplified and when player experience is included in the equation - there is almost nothing a new player can contribute to experienced groups except to slow them down or lose XP.
Edit: There is another dimension - vertical level dispersion and horizontal level power separation. With 28 levels and lower pops, the outcome is that there are less people around each level range. The horizontal level difference is the relative power of two toons in the same range.If new players can't contribute to groups (or worse are perceived as a liability), they will find less grouping options available and they will find it hard to progress their skills to become the next generation of Elite players.
Whilst some can learn to solo content and raids, I would venture that most cannot. I think the majority of players like myself learned the "tricks of the trade" from other veteran players. Some players will have the skills and desire to go onto play Elite content, others will not.
So the pyramid becomes smaller and smaller at the top.
So I believe that by adding more uber rewards for uber content will only exacerbate the current problem.
I do agree with the fundamental premise that Elite players and raiders should get the better gear, but when adding in a new difficulty I'm not sure making Reaper level gear is prudent.
That's my argument in a nutshell.
So maybe minimalisticly better gear that also looks better.