To be honest I agree with fusional.
The gear treadmill is pretty much a given in some respect. We are playing an overzealous game of "barbie doll dress up" truthfully. Why do you clear content? To obtain gear/get a stronger character. Why do you want to get a stronger character? To make it easier to clear content.. It's a cycle that keeps people logging in everyday, and there will always be a "top tier". Some will hit that top tier faster then others, and to keep them logging in and not quitting out of boredom, there needs to be a constant stream of content that is progressively more difficult.
If we roll back to that bell curve that Klive posted before :
Removing the difficulty down to the SD-1 (or even the Mean Score), you still have 50% of the playerbase at capped "completed content". It is fairly correct to say that X could indicate time spent, and Y could indicate the amount of players that have completed the content.. If you were to remove that higher difficulty, the players from 0 to 2 would be bored out of their brain with nothing to do. They have nothing to strive for, as the content that is available is already completed, causing them to lose interest and quit until next patch.
If you were to keep this difficulty however, the players that are sitting at -2 (most likely mules/alternate accounts/players that never login) up to 0 will still be around as they have reasons to login, however with this higher difficulty setting, the players sitting around 0-2 have some content to do as well.
So truthfully the most profitable way to hold a larger community is to introduce an adjustable difficulty, which will keep players of all skill levels in the game. You remove that "harder" difficulty setting and suddenly the top tier becomes non-exclusive, easy to obtain, and equates to a boring & unmotivating game.
Unfortunately a lot of "casual" players seem to have a competitive nature and want to "have the best stuff" but I am sorry, if you want that stuff you do need to actually play the game and defeat the content. Ideally new content should be released the moment the "world first" group run out of things to strive for. If you can't keep up with this - consider yourself lucky that you have a lot of things to play after all it is a game.
*edit*
In addition - I hate comparing games but quite simply look at the state that FFXI is currently in. If you are not informed on the current state then you should spend 5 mins on FFXIAH.com and hunt around.
If you don't have 3-10 "legendary" weapons of any kind then you are pretty much a brand new player.
If you don't have all your battle jobs at level 99, guess what.. Yep you signed up last week.
I quit FFXI because I found myself logging in every day, walking around Jeuno (FFXI's Ul'dah) talking to a few friends and logging out. I considered myself once more a "regular" player and yet there was no content that hadn't already been done. I also saw a lot of "hardcore" players quit once the content dried up as well, as a game is boring when there is nothing difficult to do. It becomes a dull, boring grind, with no challenge and turns into an autopilot game that you play but don't truly enjoy.