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"Badge loot" only is awful; as has been pointed out, some of the excitement of downing a boss past the first time is seeing if what you need managed to drop this time. This is true even if you have different tiers of badges, or are tokenizing all non-set drops. There should be some RNG element to loot or the game would not be the same.
However, it sounds like folks want to be able to accumulate something and after awhile have access to a reward that they "must" have. Given Blizzard's awful ideas as to what sort of things each class "must" have (or just not caring), they shouldn't be rep/"badge" rewards only. What I would envision is that you would work your way up in Rep and acquire "badges" in each dungeon/tier, and at a sufficiently high enough Rep level you could turn in some number of "badges" to get any off-set item for a boss that has been previously killed. Lore-wise it could be explained that some NPC adventuring group got it and left it with the rep leaders for those that needed it, NPCs not being restricted by BoP items as PCs are. When one looks at the lore of reputation, the rep leaders know you're going back in the dungeon and "killing" the same guys over and over; clearly you're just "incapacitating" them and taking whatever stuff they have on them, so having unseen NPC adventurers do the same thing isn't a huge stretch. Unavailable items could open up on servers after some large amount of time has passed, reflecting the fact that maybe NPCs are capable of more than any PC guild in that version of the World of Warcraft.
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