I thought they were intended on retuning everything if there was to be a squish though? Otherwise it would be a way too big loss. But quite frankly, I dont mind the high numbers. I dont really see the problem, to be honest. Its purely aesthetical. I just find it to be cool looking at the insane numbers that come for every new expansion.
But yes, Theyll still be replacing greens immediately, more or less. You want a gear change when youve been running around in the same raid gear for ages waiting for the new expansion, and it would be silly being able to use the old gear for the new quests. Cata worked prefect imo.
That is the point, it is not just that. Yes, it might look the same, doing 60 damage on 20.000 health, compared to a 60k hit on 20 million, however, the server needs to calculate a lot more digits. (random example: 60 damage is 60 damage, 60k damage can be 60.000 to 60.444)
Blizzard:
If we can make numbers such as floating combat text and boss health and item stats a little easier to read at a glance, then maybe we can endure numbers increasing exponentially for many digits to come. Now there are some very real computational limitations. PCs just can’t quickly perform math on very large numbers, so we’d have to solve all of those problems as well. Even today, tanks can hit the ten digit threat cap on some encounters.
I actually agree with replacing everything with greens right off the bat. If you don't you run into one of two problems. Either the questing is ridiculously easy with top tier gear and the leveling experience is no fun at all or the quests are tuned for top tier gear and when you try to level an alt you it is painfully hard.
I also agree with the squish but it does come with a few problems of it's own.
Firstly it will kill off any oportunity for end game play at previous expansions. You can't have for example a Wotlk guild because you could raid naxx but your gear would never scale enough to allow you a chance at the next raids. They could re-tune all the raids up from that point in every expansion but that's dedicating too much work for a niche crowd IMO. Basically it would force everyone that wants to play WoW to have the latest expansion or be stuck (or pvp i guess).
Secondly it will affect people's ability to solo/small group older stuff. As an extreme example, if they squish everything including Cata gear you would not be able to do ICC at 85 because ICC would have higher gear requirements than the (obviously retuned) cata raids. They could just give appropriate raid buffs to each instance i guess, to place people's gear where they were suppose to be at the time.
Guys, just look closely at this graph, that suggests how Blizzard would implement squishing:

Expansions still grow after eachother, gear still makes you more powerfull then you were at the last expension, the bosses will still be solable. You will still hit off the same % as you did before the squish.
As far as I can conduct from this graph, I guess that if Blizz decides to squish, they will squish every expansion when the next one comes out. So Cata would be squished when MoP comes out, etc etc. This would also make it easier to make challenging level-zones, since gear from the previous expansion is better scaled.