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"It would be extremely difficult to make a tiered progression through 5 person dungeons while also includeing a raiding game. All it would take is one person in your group to be over equiped to trivialize the lower tier dungeons."

To me, that makes the same fundamental assumption that most people make, that I just don't. Namely, why should the raid gear be so much better that it would trivialise smaller dungeon content? If the answer is that without such incentive then no one would raid, then surely that is an indictment of raiding as a play style?

I don't see why small dungeon tiered content cannot sit side by side with similiar raid content, and provide similiar-ish rewards (with a small gap in the raiders favour, perhaps). If raiding is its own reward, if people love raiding then they will still raid, even with a reduced 'gear gap' incentive.