The thing about the horse-rider relationship is that the horse does pretty much all of the work, while the rider calls all of the shots, and reaps the majority of the benefits. Sure, the horse gets food and shelter, but so do human slaves. The rider gets on-demand transportation at will, at great discomfort or pain for the horse. This is especially interesting because the horse holds a great deal of unused power: the horse can at any time choose to stop listening to the rider and go off in whatever direction she chooses, and the rider must either come along for the ride, or leap off and become stranded. And yet, the horse does not make this choice, because serving the rider allows her to achieve her main goals, which are food and shelter. So she accepts the extra work, and the indignity, in order to get what she wants.
This is my analogy for all 25-man raids outside of hardcore raiding guilds, by the way. (by hardcore, I mean with serious raid attendance and performance requirements, competing for server progression status: basically guilds where raiding is all that matters).
The horse is the high-performance raider (highP for short, because I don't feel like typing it out every time). This is someone who is familiar with their class mechanics, has a good rotation and idea of how to set up their stats and spec. They bring consumables, learn the fights, and can generally stay out of the bad stuff like lava. You know who I'm talking about.
The rider is the low-performance raider (lowP for short). They don't gem or enchant consistently, they may or may not have consumables, they never bothered to find out what crafted gear was available to them, let alone make it, and regardless of gear their performance is constantly half that of the highP's. Again, you know who I'm talking about.
In a PuG or a casual raiding guild, the highP needs the lowP (as the horse needs the rider) because without the lowP, she cannot get enough people to even attempt the raid. The lowP needs the highP because without her, the lowP will experience a lot of pain (wipes), will take a lot longer to reach the destination (killing the boss), and may never even make it there at all.
This is much less true for 10-man raids. It's undeniable that it's much easier to find and gather 10 good players than it is to find and gather 25 good players.
25-mans are much friendlier to lowPs than 10 mans. I know from experience you can do a lot of the current 25-man content with only about half the raid performing well, and the other half performing at a sub-par level.
Now imagine trying to clear all the 10-man content with 5 good players and 5 sucky players. Sorry, ain't happening.
So not only can a greater percentage of the raid be lowPs in 25-mans, but they are also simply greater in number. In a 10 man, you've got at most 3 lowPs getting loot mostly from the work of others (by exploiting them, basically). In a 25 man, you're likely to have 12 lowPs exploiting the efforts of the highPs. There are more people being carried, and you can get by with a higher percentage being carried as well.
This in and of itself isn't necessarily bad, until you consider that the loot from 10-mans is an entire tier lower in quality than the loot from 25 mans. So these Naxx10 clears, with a higher percentage of highPs, is getting gear that is a tier weaker than what's being handed to a raid with 12 lowPs in it. Do you start to see the issue? Very quickly, the game becomes overrun with scrubs who are actually better geared than many of the excellent players! Anytime you see someone wearing a pieces that says "Valorous", there's a 50/50 chance that person completely sucks at the game or just doesn't put in the effort to do reasonably well. Alternatively, when you see someone wearing a "Heroes" piece that can't be bought with badges, such as the shoulders or pants, it's a pretty safe bet that that person can play reasonably well, and puts some effort into it. It's a joke. People are being rewarded in reverse of their contribution.
The only counter the horse (who puts in all of the grunt work while the rider just sits there, remember) has available to get loot that simply equals that of the person exploiting him is to- wait for it- accept exploitation. If the highP player wants competitive gear, she can either join a super-competitive, life-consuming guild full of nothing but highPs (which is not fun for most people), or she can accept that she will have to carry half of the raid with her efforts, knowing that the scrubs have exactly the same chance of getting the loot that she does. Her effort effectively counts for nothing, since people who put in minimal effort receive exactly the same outcomes.
So why don't the highPs simply throw off the yoke of their oppressors? Because unless both sides accept this arrangement, no one gets anything. The lowPs won't improve, and will instead move on to look for a new horse. The highPs won't suddenly be able to clone themselves into a 25 man team, and won't all be able to join an elite hardcore raiding guild. So there will always be highPs available to exploit.
And besides, I know some lowPs that I just like hanging out with for their personalities. We don't make decisions in an MMO in an asocial vaccuum. Who we like plays a part. Sometimes I'd rather carry a bunch of my friends than run with a bunch of high-performance jerks.
This disparity between contribution and reward is the problem, . But how can Blizzard fix it? Here are my suggestions of things they could reasonably do without revamping the entire game:
1) Make 25 mans actually more difficult. Sure, it's harder to get 25 people together than 10. But that alone does not justify an entire tier difference in loot. I know that many bosses have extra abilities, or more deadly abilities in 25 mans, but this actually only serves to bring the difficulty on par with the 10 mans. If Noth's curse didn't do a ton more damage in 25 man, then it would become even more trivial because you went from having 2 healers to having 8 or so. You inevitably have more people who can decurse. The main reason 10 man 3-drake OS is harder than 25 man is because it's harder to stack extra tanks in a 10-man raid. Period. Being able to bring more people in many cases actually makes things easier. The extra abilities and damage do not do enough to bring the difficulty back up to 10-man levels when you are rocking 3-4 times as many healers.
2) Reduce the loot spread. It's a step in the right direction that KT, Sapph, and Malygos drop loot a tier higher than other 10-man bosses (and the same in 25 man). But it's not enough. Instead, have the first 2 bosses in each wing drop heroic-level loot in 10 man, then all the rest of the 10 man bosses drop tier 7. At the same time, change the first 2 bosses of each wing in 25 man to drop tier 7 instead of tier 7.5. The remaining 25-man bosses could then be the only source of tier 7.5. There would no longer be anything better in the game (currently KT/Sapph/Maly drop tier 8 level loot in 25 mans - stop that).
Another idea in the same vein is to give Valorous badges for some 10-man content, such as KT, Sapph, Maly, and OS 2 or 3 drakes. Make some changes so that a group of really excellent 10-man players can eventually get the same gear as an average or below-average 25-man raider, rather than the current hard-gating of Valorous badge rewards and most tier 7.5 and above.
3) Require more personal responsibility. This goes hand-in-hand with reducing the loot spread because that makes it harder to get overgeared raid members who can compensate for undergeared ones. Social pressure and constant wipes will encourage at least some lowPs to make crafted gear and gem/enchant appropriately. Add aspects to fights that require each person in the raid to perform reasonably well, rather than making fights that you can still win after half the raid dies from standing directly under a wave of lava.
4) This one's on the players: stop giving out 25 man loot on random rolls. Stop believing that just being present at a raid earns you an equal shot at loot. If you do 1600 dps on patchwerk, then the other guy who did 4000 should get the resultant drop before you do. Realize that this is fair. You aren't getting screwed by this. Stop expecting to be carried, and understand that expecting equal loot for poor performance is exploitative. If you want a pragmatic reason not to do it, if the moral ones aren't enough: it's going to drive away the good players who allow you to kill bosses in the first place. All of us have personally seen guild split for exactly this reason.
DISCLAIMER: I am not arguing that all content needs to be hardcore. In fact, I think it's awesome that raiding is more accessible and easier. The ONLY thing I have a beef with is the fact that the version with the best loot is tailored to the most casual players, while the version with inferior loot caters more toward the hardcore or expert players. It should be reversed. People who don't put much effort into their character and just want to have fun or be social? They are more than welcome to raid, and fill up on all the tier 7 they could want. But reserve the tier 7.5 for the people who put the most time and effort into their character and their performance. Right now, the loot availability is backwards.