I think I am a little confused, perhaps because I missed the discussion that led to the loot change. I'm not understanding what was wrong with the old system.
If the problem was smaller groups running raids, the proper course of action is to set up raids to prevent few people from completing it, not take the loot away. (This is difficult in to implement in DDO I admit, but it can be done)
If the problem was people not fairly distributing loot, I would expect that to take care of itself as people refuse to raid with those they do not trust.
My feeling is that the new raid loot system is not fixable, and my best recommendation would be the old system. I'm not interested in a 1 in 6 chance to get loot I don't likely want (e.g. new greatsword for my sorceror, which I would of course give away anyway). Repeating a raid with the same toon 20 times to get loot - that would be ok if I were unemployed and loved the raids for the sake of the raids. Unfortunately, I enjoyed smaller raid groups because it shifts the challenge from herding cats to excecuting strategy (seriously, 12-man groups cause more problems with people not paying attention than they help with the extra manpower). It gets tedious always telling everyone the same thing over and over to keep them from wiping the group - I don't like it when everyone gets mad at the person who messed up, but it happens all the time (11 good people can often not recover from the actions of one careless person).
I was really happy with the raid system toward the end there, as my guild, which is too small to ever field a 12 man team, was finally successfully raiding and we were being rewarded.
So as far as I'm concerned the old system was fine, and the new system means I have little to no interest in raiding, and minor tweaks to the new system don't interest me much.
On the bright side I haven't had to spend any time running the pre-raids over and over since the change so all in all I don't really miss the raids that much.