This is good material. You are tackling a difficult beast and I commend you for it. I largely like your ideas, though I haven't spent a lot of time being critical with your ideas. Making certain gear/loot available only by running multiple instances sounds great. I get sucked into the farm/grind sometimes and forget about other really cool instances until I actually play one off chance and go, "man, I forgot how cool this raid/instance was."
There is a lot of Turbine content to be appreciated that gets diminished with the big mmo f-word: farm
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