Buh, you're not looking at it from a few different, important perspectives.

Raid Lockouts make it so that Paragon, Ensidia, and other guilds can't call in sick to work the week of a patch, raid until their ears bleed, have ALL the drops from all the bosses that they can possibly use, and then cease to raid until the next tier of content.

It doesn't take a lot to see that this would destroy WoW raiding- people with time would trump ALL others. Time is already a valuable commodity in WoW, but no lockouts would mean your top-end loot is limited only by your time, which would make those of us with limited time useless at the upper end of raid content. The competition element is a part of the fun, and the same thing happens in a lot of things- like sports competitions. What if you could make it to the Final Four or the World Cup just by playing every opponent in sight? You can't, the rules arrange games, you play in the games, you see how you stack up, and then it's over. Lockouts do something similar by giving us one downing of each boss on a certain mode a week. It controls progression, and is another form of gating, like how ICC and ToC came out.

It's like daily heroics for Frost Emblems, weekly awards of Arena points, daily quest limits, and so many other things. Blizzard wants you to LOVE WoW, to enjoy it deeply and often, but they don't want it to consume your life (and thus, your ability to pay for it. XD). These lockouts and limits are the answer, allowing someone to progress a certain distance each week, if they put in the effort, but not further than a certain distance, thus capping the effort.

I've run need/greed 25-man pugs before, and it CAN work. But it would NOT work in the random dungeon finder. One wing of ICC Might- and I say might cautiously- work, but only once most of the raiders wildly outgear the content. Raiders ready for heroic mode ICC, gear-wise, could be put into a random raid finder and probably be fine, if the raid was short. But let me tell you, even getting PuGs on the same server to organize for a second night of raiding in a 10-MAN is hellish, random raids could never be longer than a night, reliably, and the results in general would suck like a tornado. The 5-mans are small, simple to organize, and can have few to no consequences if the group just falls apart. the 10-mans require significantly more organization, and 25-mans are a full-time job for one or two people just to keep running! There's a reason why Blizz formerly had 25-man raiding loot a tier above the 10-man stuff. 25-mans often die to the 'logistics boss,' or the 'Real-life boss.' If they put in a 10-man raid finder, I might use it for shorter raids, if they put in a 25-man raid finder, I, and thousands of other generally skilled but easily annoyed players, will not touch it- not with 25-foot long pole.