Is the Badge of justice reward system broken?

Badge of justice was introduced in the expansion last year. During the year, Blizzard staff repeatedly said that they are satisfied with the system and will expand it.

They originally drop from bosses in Outland instance with heroic difficulty.
In order to enter heroic instances, individual player requires heroic key available at revered reputation for a certain faction.
In patch 2.3, the heroic key requirement is lowered to honored reputation. In addition, all bosses in Karazhan and Zul'Amen also drop them (two badges each). Daily quests in heroic instances also give two badges as reward.
As of patch 2.4, all raid bosses drops badge of justice also.
Total number of badges dropped per instance

For a certain number of badges, one can trade in for level 70 epic items. It works like a PvE equivalent to honor points and battleground marks. Or even some kind of in-game DKP.
Before patch 2.3, one can buy weapons, shields, offhands, rings, trinkets, cloaks, relics, and Fire Resistance gear. They are item level 110/115, which are similar to heroics and tier-4 instances.
Wrist, head, foot and hand slot items, as well as additional rings, cloaks and relics are added in patch 2.3. They are item level 128/133, which are superior to tier-4 but marginally inferior to tier-5.
In patch 2.4, they can also be used to purchase new equipment similar to tier-6 levels as well as epic gems. They are item level 141/146, which are basically on a par with tier-6 items.

Is the system broken?
When Maiden drop as many badges as Vashj or Illidan, I don't know what other word is better than "broken". Insane? Crazy? Or someone in Blizzard failed to do the math?

Comparing it with the PvP system, you get a static +10 in rating for every win in arena, regardless of the opponent team's rating. Does it sound fair?

When patch 2.4 hits, it won't surprise me to see players with heroic/Karazhan gear running with their new epic weapon, which is on a par with BT/MH drops.
If the season 3 arena weapon are so good that it requires personal rating to acquire, I don't think it makes sense to let a heroic and Karazhan player get a BT-level staff.

Can that be fixed?
Talking to (ranting with) a guildmate last night, we both think that some limitations have to be there in order to stop this madness.

One suggestion is to have different types of badges. Heroic and T4 instances would be one type. T5 instance can be another type and T6 instance is the third type. Then one can buy gear of the same level as where the badges are obtained.

Another suggestion is to link them with reputation. For example, Violet Eye revered to unlock the patch 2.3 items and Ashtongue Deathsworn revered for patch 2.4 items.

Third suggestion is to simply increase the number of badges drop in tier-5 and tier-6 instances. For example, TK and SSC will be 4 badges each boss whereas MH and BT bosses will drop 6 badges each. Last bosses in raid instances will always drop 1.5 times more badges, i.e. 6 badges from Kael'thas and Vashj whereas 9 badges from Achimonde and Illidan. (Meaning that a full TK will give 18 badges, full SSC 26 badges, full MH 33 badges and full BT 57 badges.)

I love badges and I'm not against making it easier for causal players to upgrade their gear. But seriously, Illidan drops as many badges as Maiden, seriously!