I'm not a game designer, but here is what I would change:

I wouldn't implement a grind step like Atma 2.0 in order to get a weapon that is 30 item levels worse than what players have been running around with for months now.
That simply makes 0 sense at all.

Step 2 was okay. A way to bring a few more players into HWs leveling dungeons and a fun trip down memory lane.

Step 3 is okay too. Items come from a variety of sources, the player can choose which one suits his playstyle. Merely the amount is off, I'd cut that in half.

@Caitlyn: Hate the idea of timed runs because I hate races against the clock in general.
I really like the idea of tying in exploration but I doubt that it would work in practice, because people write guides and could complete something like that within minutes once the guides are out.

World of Warcraft tried that once and rewarded a mount for it in the Beginning of Pandaria. Initially you searched a lot and paid attention to the world around you. Once the guide was out you were done in 20 minutes or so.