I do understand that players would be narked to find their most powerful item nerfed. I would be as well. However, I don't think it'll be as bad as it appears. First of all, people with 119 equipment should automatically be granted the appropriate merits to "auto-level" to 119 just by presenting their weapon/gear to an NPC. They've earned their "levels", so they should carry over in a new system. Secondly, the player using the equipment won't suddenly become less powerful when things change - it is merely that the equipment is doing less of the work compared to the character. It'll also potentially open up new options for people to follow, which could potentially make characters even stronger because they're not having to use suboptimal gear just because of the item level label.
The only thing that would need to change here would be the item levels on the items themselves, plus a few references in text around the game (eg. BCs). Everything else - content included - could stay the same. The fact that merit points exist, and the capacity to increase skills, attributes and so on already exists, reduces the amount of work SE needs to do. I do recognise that SE rarely, if ever change their mind, but if people make enough of a fuss they might listen. They did for the big payment scandal a few years ago, and I hope that they will now. Yes, it's unlikely, but that's never a reason not to try, and I think a lot of good could come of it.
And yes, please, we don't need to increase the cap further. Fully agree there.