They aren't rewarding you for "almost being good enough to win." They're rewarding you for nearly matching another group of player's skills but ultimately losing. It's incentive to keep trying when you're on a losing streak.
All classes to 100. Check.
My opinions: 5.0 was the golden age of content, the pruning was far too light and HFC is the final raid of WoD.
It would be frustrating to not get at least something out of it, when you're losing.
That's ridiculous. Defeat should have no reward associated with it.