Personally, I rather like the feel of good, old fashioned random loot; somehow, it keeps the game fun, and it makes for showing off. However, it stops being funny when, say you're DEing the same thing over and over again, while something half the people in the raid want. I could give you hundreds of anecdotes about that, but I think we've all had our share. So, let's assume you've been farming BT for a year, and have yet to see enough of certain drops. How do you fix that? Well, say after you complete the 'kill Illidan quest' AND are exalted with Ashtongue Deathsworn, you get a one time quest where you pick one or two pieces of loot you always wanted. For the sake of argument, let's say one generic ring/neck/cape/trinket/weapon pick, depending on your path (assassin, arch mage, restorer and protector) and maybe one non-tier armor class specific loot (i.e dps mail/healing mail/pally plate/warrior plate). Of course, similar quest to kill Archi, awarding the same choice from the respective instance. Ideally, not 9/10 of your healers will go for Memento, because of an unlucky streak, leaving the next 4 ones that drop to be disenchanted
A bit of communication, personal priorities and planning ahead should ease the loot distribution for everyone. Not everyone will value the same items equally. As a caveat, the higher ilevel items from the end bosses may or may not be included on the selection list, depending on how steep the reputation grind is tuned to be. The inherent problem I see to this is that it only works well with reputation based instances; this would leave, say Gruul's lair uncovered, unless for some reason you could find a reason to link a quest do a different faction reputation. Also, this would most likely turn the game into a 'grind exalted and move on' fest so perhaps these changes could be introduced retroactively, as a nerf, of sorts.
On a different train of thought, the idea of tokens isn't really bad. It's the actual way they're put into the game that I'm displeased with. It's been said before, but it makes absolutely no fucking sense that the guy that sells tier 4/5 is safely in Shattrath, showing the goodies off. It also makes no sense that the tier dropping bosses would just have some uncrafted armor bits on them; the tier bosses are supposed to be high ranking bastards among bastards. So let's say Archimonde wouldn't drop 'Helm of the Forgotten ... ' but 'Archimonde's Shattered crown/cowl/helm', which, aside from being a nice, shiny trophy, still retains some of his power. Except it's broken and you can't tap into that power; you need someone to unlock it for you, for whatever modest turn in (1x Arcane Tome/Fel Armament or 1x Bolt of Cloth or heck, 1xChromaggus' Right Head, if you please, depending on how long a time sink you want the respective level of raiding to be). Same 'deliver X token to Y NPC' mechanics, a whole new feel. In theory, anyway...
Of course, it makes sense that the tier 6 vendor or turn in quest, or whatever, should at least be in the Night elf base in Hyjal, or in some danger. Maybe, but it's way out of place to have to go to MH every time you need to get a token. So let's say he's conveniently Ad'al instead, and it would still make more sense than what we have so far. You bring proof of your deeds, and it just so happens he can salvage something
As for further alternatives to raid gear? Badges are perfect system for that. However, it's flawed in that you basically need to backtrack content to get badges. Nothing wrong with that, but the ones who have the time and the guild to clear MH/BT each week, kill 4 bosses in Sunwell, and still squeeze in a weekend Kara and ZA are the ones who least need the badges, as opposed to those who are even now struggling with Solarian or HKM. So, how about limiting the number of badges a week a character can earn to say 40 (seeing as a Kara clear yields 25)? In theory, this should encourage people to get the fuck out of Kara already and do a heroic or two to get their last 3-5 badges. Now, this goes against some of the suggestions for tiered badges, but let's take this further and assume they make the really powerful ilevel 141+ items cost 200 badges, while an ilevel 115 would only cost 40. The idea behind this - unless it's really a massive error of judgment on my behalf - is that badge loot is supposed to be an alternative to raid earned gear. But a hardcore raider that only really needs a few upgrades will probably already have a healthy stockpile of badges handy, and is willing to spend them for even the smallest upgrade. By contrast, someone who's not as keen on min-maxing will be quite content with a level 115 or 128 item for that slot, both of which offer better value per effort.
As for what this badge loot should be? A bit weaker than the raiding option? A bit better than the raiding option? Personally, I think it should be a niche somewhere between two or more of the best raid drop options. Let's take, for example, physical dps cloaks for someone in mid tier 6 content, who still hasn't managed to upgrade his
[Drape of the Dark Reavers]. His only options are
[Thalassian Wildercloak] and
[Shadowmoon Destroyer's Drape]. Now, one's purely agility based, the other is rating based. Either would be a massive upgrade, but let's assume he could chose an ilevel 141 badge cloak with a dash of agility, a dash of + hit rating or a dash of + haste. This would somehow kill the proverbial two birds with one stone; firstly, it would provide a good, decent alternative to some elusive and/or highly contested piece of gear, and it would also stop everyone who's spent enough time farming from looking like clones.