What makes the 10-man raid so attractive?
In the absence of any loot concerns, you could reasonably say that the 10-man raid has a lot more going for it than the 25-man. 10-mans are far simpler to organize and coordinate, generally faster to run, easier to administrate if you use DKP or loot council, and they make it a lot easier to guarantee consistent quality across the raid (the vast gulf between completion rates on Immortal versus Undying is a good clue to how this has worked out in practice). Blizzard is even more committed to the idea of BtPNtC for 10-mans, because they know you can't necessarily rely on the presence of every class. 10-man raids can also be more difficult than 25-mans, as we've seen in Tier 7, sating hardcore players' appetites for tough raid content and silencing critics who might otherwise dismiss them as 25-mans on training wheels. And, on top of everything else, 10-man raiders now see the exact same content as 25-man raiders.
Once you start adding all of this up, the situation starts to look pretty grim for 25-mans. If neither form of raiding awarded any loot and people did them purely for the pleasure of experiencing the content, there would be no external incentive to make 25-man raiding worth the time or effort.
Question: How do you get people to do 25-man raids when they can see the same content in a 10-man with far less hassle?
Answer: You can't.
Not unless you provide them with an incentive, and -- this is an MMORPG, right? -- that incentive is loot.
Shouldn't people do 25-mans just because they like 25-mans?
When you think about it, the only reason to do 25-man raids (if we remove loot from the equation) would be belonging to a guild with too many people to squeeze into a 10-man. Even then, I think the pressure on such a guild would be to form multiple 10-man raid teams rather than put the additional effort into running a 25-man.
Our poll results indicate that most people don't think players would bother running 25-mans if you could get the same gear elsewhere, so the question of "should" is almost beside the point. As much as I agree that players "should" run 25-mans if they prefer them, we're not giving them much reason to arrive at that preference. It's irrational to expect that most people would prefer to do the exact same raid content with more logistical difficulties for no additional reward. The history of player behavior serves to demonstrate that players are quite rational indeed, and are quick to notice, evaluate, and adopt the most efficient means of character advancement.
What happens if we standardize loot quality across 10-man and 25-man raids?
If I were a Blizzard developer sitting in my office sipping gin on some idle Thursday and I were asked about it, my response would be that gear equalization between 10-man and 25-man raids would result in two intractable problems:
Problem A: Players would gear up significantly faster.
If you could get best-in-slot gear in both 10-man and 25-man raids, hardcore or otherwise serious raiders would run both obsessively in order to gear up as quickly as possible for the extra advantage on hard-mode achievements and encounters like Algalon. This may sound great to players, but it's not such a great deal for Blizzard, which spent months working on this content and has both a business and design interest in extending its lifespan. And in the long run, any honest player would admit that conquering all of the game's content as quickly as possible isn't an ideal way to experience it.
There is no way for Blizzard to design and program content fast enough to keep up with the demands of a guild like Ensidia, but if a much wider swathe of the game population is no different in exhausting its gear and content offerings within weeks of a content patch's release, the developers have a problem. Raid lockouts and the distribution of gear into different 10-man and 25-man i-levels are two of the last pacing mechanisms Blizzard continues to use to keep players from trying to get everything they want immediately. It strikes me as unwise to eliminate the latter, particularly in an age where raid content is meant to be more accessible (i.e. easier).
I think the new form of pacing mechanism we've seen -- the 1-hour-per-week Algalon attempt -- may be the first of many such 1-hour or otherwise short-duration lockouts.
Problem B: Assuming A occurs, we don't want a repeat of the organizational nightmare that arose in early Tier 4 content.
The Karazhan-to-Gruul's leap in Tier 4 absolutely destroyed a number of guilds for precisely this reason; what did you do about the extra 5 people? A 25-man raiding guild doesn't break down evenly into either 2 10-man or 3 10-man teams, period. Either you pick the former and screw 5 people out of a raid slot every week, or you draft additional friend-rank or PuG players with less experience and gear to fill the slots on the 3rd 10-man team. While the situation was undeniably exacerbated by the downsizing of 40-man raids to 25-mans, guild leaders went insane trying to keep every player rotated into the content they needed without leaving anyone out, favoring players in needed roles, or coming up short when they tried to do Gruul's.
Again, I really do not believe that standardizing gear drops across both tiers of raid content would result in 25-man players continuing to do 25-mans just because they prefer them, and 10-man players continuing to do 10-mans just because they prefer them. Competitive or otherwise serious raiding guilds would correctly see limiting themselves to one form of content as hindering their progress. Thus, Problem B is virtually fated to occur, with the same unhappy results and guild instability issues as Tier 4.
Is Blizzard directly responsible for this? No. But the problems that inadvertently resulted from the design of Tier 4 raid progression didn't escape their attention either.
Can we fix this by locking players into either 10-man or 25-man raids?
This is a possibility, but I believe it would ultimately cause more problems than it would solve.
First, it eliminates the flexibility players currently enjoy with respect to how they want to experience these raids. At the moment, you can do one form of raiding with your guild, and another more informally with a group of friends, guildies, and alts if you want. Locking players out of one set of raids obviously kills this.
Secondly, it would severely limit player generosity with respect to bringing characters or alts to help friends' 10- or 25-man runs in the event of a player's departure or disconnect. Most people I know happily volunteer to bring a toon to help out in these situations, but I doubt they'd be happy to do so if it means the few bosses they'll see as a replacement player will shut down any other raiding they might have been able to do that week. No one's going to want to bring their toon in to help a 10-man raid stuck at Sapphiron and Kel'Thuzad if that means they can't enter Naxx-25.
Thirdly, I return to my original premise; people are relentlessly rational. If you can get 25-man content and 25-man gear at the 10-man level, this is a very strong incentive for players not to bother with 25-man raiding. I don't believe that locking players into either 10-mans or 25-mans would result in an instantaneous death for 25-man raiding, but as raiding guild attrition invariably takes its course, the temptation for many guild leaders in the long run is going to be downsizing their guilds and simply doing 10-man raids.
Again, I can't stress enough that the 10-man raid has a lot more going for it than the 25-man does if you remove loot from the equation. With loot equalized, the 25-man is at a significant disadvantage that can hardly work to its longterm benefit. The question of whether 25-mans should remain in the game is one for a different day, but if we presume that they're here to stay, Blizzard is entirely correcting in creating incentives that make the 25-man a "rational" choice.