In an ideal world, HORIZONTAL.

But given the WoW influence and compromises, I think HYBRID (some Horizontal Gear Sets (same iLevel) w/ Unique Stats spread across 2 patches), and then item Level Increase) is fine. Example of Hybrid:

Instead of the current:

* Patch 1: i90
* Patch 3: i110
* Patch 5: i130

Hybrid would be:

* Patch 1: i90 (2 Sets of Gear)
* Patch 3: i90 (Alternate Set of Gear w/ Unique Stats)
* Patch 5: i110 (2 Sets of Gear)
* Patch 7: i110 (Alternate Set of Gear w/ Unique Stats)


It at least slows down the Gear / Stat Inflation in this game, and gives SOME feeling of your gear meaning something for a period of time.