Overmelding is not fun

[Datachanger]

This is a common misconception. At the beginning of an expansion, yes, prices can get quite high. By this point though, everything has plummeted because getting materia is incredibly easy. With a system as generous as you've purposed, materia would become even less valuable due to there being less people needing it despite the massive volume. In other words, it may as well not even exist because they'd be bordering on 3k a pop if that.

This is a really good point. And where I think tweaking could be done by the game designers.
I did some simulations where I with one million successful melds, and here were the results:

There is a substantial change, here. At 5%, there would be 35% less materia used, overall. This is a wide swing, and your point is valid.
I think I'd have to give a delta, here. However, no matter the new system, I still think it should be deterministic, so you can plan to farm a specific amount, and feel safe, so you can be more like this guy:

I don't overmeld DoW/M gear much at all, due to me mostly being a crafter/gatherer so I don't have much to add there. But as a crafter/gatherer I can say that no one who is even remotely serious should be paying Gil for materia, and the assumption that you must is just false. The stuff is thrown at us from every direction but mostly from just doing what we do. Spiritbonding and Scrips my loves, that is the way. I haven't spent a single Gil on overmelds since HW I wanna say, nor have I ever sold any. Short term gains and all that. Regardless, I doubt we'll see any changes to the system, imo it is "working as intended". We may not like it but RNG is a big part of the necessary roadblocks that the grind consists of. It's easy and cheap to implement and effective, and also not going anywhere.

I also try to do this as much as possible, keeping my expenses down. But you know what hurts? When your stockpile you spent weeks on is evaporated in one meld. Out of all the times I have stockpiled, there was always at least 2 specific materia I ran out of. Sure, I could go farm another 200 materia. But We raid tonight (the night new crafted gear is released). So, I need to be able to craft my stuff, today. I don't have time to go farm that out to recuperate my bad RNG.

With that said, I don't think they need to change the system. This is the nature of randomness.

Of all the RNG systems in the game, I don't think I have ever seen anyone praise systems which have excessive RNG behind it. Eureka's Logograms have RNG on getting the crystal, and then there's RNG on getting the mnemes you want. I remember reading many threads about the frustrations behind trying to get the actions you need, especially the ones to attempt BA. In Bozja, if you want any chance at defeating DRS, you need the Lost Actions, which is a better System than Eureka, but man does it suck to have to Spend 200k+ gil to buy 10 Fragments and only get 1 lost blood rage.

The loot system, which used to have more RNG behind it, has undergone great improvement with the chest system. It cut a layer of RNG. While there are some complaints about "{X} gear dropping every week" the books still make it deterministic. You can still have RNG, but having layers of RNG, and with it not being deterministic really just sucks the fun out of it.

I tracked my materia melding in Google Sheets. I used to sell pentamelded gear on the MB. I had a lot of data points. Remember that 161 attempts at a 5% meld? 14 attempts @ 5% should yield a success 50% of the time. That time it went way over. But over the course of thousands of meld attempts on gear - that 161 was evened out.

In other words, I find the RNG they use to be pretty good over the long term. We always remember the 161 fails. But how many times do we have a 5 or 7% meld succeed on try #3? How many times does a 17% meld succeed on try #1? It all evens out.

It does, yes. However, that presumes you have the stockpile to be able to eat those giant losses in the first place.
And sadly, as you mentioned, Negativity Bias is a thing, too, thus people will remember the bad times more often than the 5% meld that hit in 3 attempts. This leaves the players looking at the system negatively more than positively. If that's what people tend to remember of the system, is it a good system?