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It sounds like a good idea but I think that the RNG loot actually makes for a better guild situation, at least raid attendance-wise. I can speak from first hand experience because my guild is going through a lot of apathy due to nearly everyone having the loot from Black Temple/Hyjal (we're running Sunwell Plateau) but there's still a need to gear up new recruits to a Sunwell standard. Attendance isn't so bad that we've had to cancel raids but it has been necessary to patch up a few holes with reservists.
Now, my point is that people would lose interest a lot faster if their drops were guaranteed as long as they spent x amount of time in y instance collecting badges. With the random number generator, people are actually rather keen to run these instances because they need the 1 piece of loot that'll be the crowning glory in their set or to see if a warglaive drops.
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