Alici

"Dumbing down" is a fix, but only assuming that people actually can or want to progress in a 5 -> 10 -> 25 model. The entire premise of the OP's proposal is that there are those who cannot make this type of progression.

Take myself, for example. I used to raid 5-7 days a week Pre-BC, but real life commitments forced me to stop. It's gotten to the point where I can't even commit to Karazhan runs; I simply will not submit my guild or friends to my disturbance when my real life could stop my gameplay for the day literally at a moment's notice. Therefore, I am resigned to PUG 5-mans and heroics.

I have all the in-game tools needed to raid with my guild, and the gear needed to support it. However, my situation simply does not allow that option to me. Therefore, I cannot make use of Blizzard's intended progression ladder, and my raiding shaman in purples sits because she no longer gets any use out of running the same heroics over and over.

The OP's solution is modeled after Arena Seasons, and it's actually an elegant system of progression. You keep progressing your character playing how you like to play, which in my case would be 5-man instances. Forcing people into certain types of playstyles (PvP, raiding) that they might not like or have access to in order to progress their characters alienates a lot of players.

And it's been covered before, but in terms of Blizzard's resources, it takes a lot less resources to tune an instance or encounter than it does to create a new one.