This was actually a pretty decent system. Why not let raids consist of materials for some items and rare/ex. also?
Like to take Kirin for example from FFXI. He dropped not only a Kirin's Osode, but also dropped a Damascus Ingot, which made a few things such as a Haubergeon. FFXI actually had a pretty good balance on crafted gear and rare/ex. gear. One shouldn't be favored over another, it should be working together. I still stand however that rare/ex. ultimately needs to be better.
Like Mog said, making the best gear is way too easy. If better armor is to go through crafting, then the materials better be hard to get. FFXIV in the beginning actually did well with this and while it would need tweaking, the system could work if balanced right with other rare/ex. gear.
