I believe the improvement has to do with how big the gap is between your current item and the next better age category. The idea is that installing all the star light crystals in a level 95 second age will result in a level 95 second age+ that is still slightly inferior to a level 95 first age without any starlight crystals.
It is something like this (make up numbers to illustrate a point):
Second age without a crystal 85 DPS
Second age with one crystal 86 DPS
Second age with two crystals 87 DPS
Second age with three crystals 88 DPS
First age without a crystal 90 DPS
Turbine is trying to avoid a significant Pay To Win situation. Get the level capped weapons. Slap in all the crystals. You have a much better item than a non crystal item.
IIRC - Turbine wanted to restrict the Lotro Store bonus to no more than a 5% improvement. 3 points on 85 is 3.5%. Turbine could go to 1.4 DPS per crystal which max out the second age at 89.2 DPS. Turbine would need to raise the unmodified DPS for the first age because .8 DPS is not enough.
Unless stated otherwise, all content in this post is My Personal Opinion.