The way I phrased the question may have unintentionally implied that LFR doesn't serve anyone. It clearly is being run, but I still think it's a legitimate question: who/what does it serve? And what does the planned change do to impact that group?
Most of the items listed are currently covered by Flex raids. If Flex were as simple as hitting a built-in button to queue, would that make it more palatable? I'm mainly curious if the barrier is one of UI/convenience, or if it's the difficulty in Flex compared to LFR, or if it's player behavior.
Of course PUGs will require more item level than is generally needed. That has always been true, since forever. LFR is basically an intermediate step between Heroic Dungeons and Flex. I would expect people to do LFR to get gear to do PUG Flex if they are not already in a guild that does their own Flex+ raids.
This is basically what currently happens, and I am not sure that there is a huge planned difference, except in cosmetics. For anyone who only does LFR exclusively, is it the insult that the gear is not even cosmetically equivalent to other raids?