Well, as for the under-powered gear, I've found a use for them since I don't raid or run dungeons a whole lot (just enough to get an i130 weapon and a couple of other i130 pieces). The crafted gear has allowed me to jump from <i50 to i110 immediately upon reaching level 50, meeting all ilvl requirements associated with the main story quests.

I suppose its purpose would be to simply bypass the normal gear progression, which can be helpful if you're leveling a lot of battle classes.