Honestly yes, it is a big overreaction, but I can see where they're coming from. Crafted gear making Raid gear obsolete is a big problem, both from a Developer and Player standpoint.

As a Developer, you're faced with the problem that players can clear Endgame content significantly faster than expected. Whether they could clear it in a week or a month using Crafted gear, this DRASTICALLY reduces the life cycle of the patch and means players will get bored much faster and unsub/leave. Not only that, with some Crafted pieces being better than the Endgame raid pieces it means players will have even less incentive to do endgame content as they have less pieces to farm for.

As a Player, you're faced with the problem that in order to be competitive some groups may REQUIRE overmelded Crafted gear. This goes hand in hand with the Vit Accessories issue in that a player who only wants to focus on Combat feels forced to find a way to make large amounts of gil in order to stay competitive. Not only that, but with the gear and materia being widely sought after it shoots their prices up and while this is great for a Crafter, for someone that is Combat focused and unable to make large quantities of gil it feels like a goal they cannot achieve through their own abilities.

It was definitely an overreaction, but not an unjustified one.