Another reason that there is separate 5-man, 10-man, and 25-man content is that they progressively take more teamwork and coordination (and commitment). Not everyone has the time to coordinate with that many people to just get something done.

I prefer 5-man content because it is generally fairly short, and takes very little time to get going compared to bigger events. I rarely do 10-man content, and only did two 25-man runs in the last year in TBC.

I don't expect to see any tier 7.5 gear for a long time, but I have a feeling that Blizzard will probably make it easier to obtain once raiders have moved onto tier 8 or 9 gear. At that point, they won't care very much if a heroism -> valor system is added, since they will be well above that gear level anyways. It will give the non-raiders a final gasp at the "uber loot" before Blizz announces when the next expansion is expected out and greens replace them again with generic models.

In the meantime, I agree that the game needs new 5-man content to be released on a fairly regular basis. Not because they have even better loot, but just to keep people interested in the game. New rare pets/mounts/gizmos that drop to give something new to strive for. I also like to see other story lines, even if they are not directly related to the greater story line of the expansion. An instance that relates the taunka to the tauren and gives some more background, for example. Or a story line that may give some pretext into whatever they are secretly concocting for a later expansion.