It's more of akin to the concept of an MMO. I don't think difficulty is the issue here since difficulty could be aligned with any number of factors.
The choices you speak of would deter people from completing the high volume content; simply because you could bring less people and not have to compete with them for loot.
You mention how gear should be distributed among different amounts of content; just like in XI. That does work, but the same people complaining about party size; would continue to complain about not being able to get a specific piece, because the content is intended for many people.
I'm all for choices, but there has to be a line drawn somewhere that tells these people to fathom the concept of an MMO.

The whole risk = reward...that's crap. The content should be designed with the high number of people in mind. If it becomes feasible with less people, there should be some adjustments made to make sure people are being challenged.