The majority of players do not have the cloak, and the majority of characters in oqueue and oraid do not have cloaks because a lot of alts go into flex. A majority of players don't even want to do the cloak on 2 characters. Yes you will always choose the higher ilevels but you will also choose a group based on what classes are available. Its not hard to hit ilevel 535 without ever even going into LFR none the less getting the legendary cloak. Yes it requires luck and time/effort but its entirely possible. I dont have the cloak on my tank and I got it to 535 in 2 weeks with barely any effort.
If anything inflated ilevels it was the invention of Flex which put a whole 40 ilevels between LFR and Normal gear.