This already happens naturally because many resources become less valuable and worthwhile as time goes on and can be safely expunged from your material stocks unless you're in some niche market. Doing as you suggest would simply take materials that might otherwise have value and eliminate it. Your example in particular would allow recipes that currently call for Doman Iron Ore to simply use ordinary Iron Ore from a vendor. Likewise, there is an advantage to using lower grade materia for crafters and gatherers, and removing those lower grade materia would make melding more expensive and wasteful. Additionally, casual crafters sometimes need poor people melds, which will include more older materia than someone like me would use.

In short, while I'd agree the game's inventory system is still pretty terrible, it's not because of the way material requirements are structured. That is a feature, not a bug or oversight.