Something about the idea of failing to attach materia and losing materials rubs me wrong. It just seems like a colossal waste of time that doesn't correspond to anything in the real world.

In the real world craftsmen take their time and plan with care when using expensive materials to create something. Does a jewelry store charge you for 20 diamond rings just to sell you one engagement ring? Does an auto body shop charge you for 20 racing stripes just to put one on your car? Does the computer shop tell you upgrading your RAM has a chance to fail and you will lose all the RAM sticks they use to attempt to upgrade your RAM to 6GB? No, because that would be completely retarded. So if you like this system, you like to be retarded.