Shade, you and Sephiroth have some great ideas. I think I prefer all of his changes to your ideas but your base ideas were wonderful as well.
I particularly think that +9 items should be min lvl 25 probably. I particularly like all of the novel properties as I think everyone will agree that an item that opens up whole build options and flavors is better than one uber-consolidation item (hence why I liked the old red dragon armor over the new Cormyrian one).
My take on the upgrade system:
Scrolls are good because, as others said, it gives everyone from beginners to vets incentive to kill monsters as fast as possible, often cooperatively.
Shards give people a reason to run the pack's raid but with so many items, GH could suffer the loot dilution of Sands. Proposed solution: give epic hard chapter or side quests a chance to drop shards as well (lower than raid), and epic
elite a chance to drop the shards at almost the same rate as the raid but only for specific items (e.g. farm Trial by Fire for 3% chance to get the shard for Giantcraft Siberys Compass and Tortured Livewood).
Seals are the third tier of painful grind that I think we could all do without. Proposed solution: seals are NOT mandatory to upgrade all epic items, they are ONLY required to add epic slots to items with slots. Items too powerful to have a slot would be exempt from this and still require a seal.