First one is better with TF items. It would be nice to see TF HC 2/2 items (which to be fair are VERY RARE and I don't think you would see a guild where everyone is sitting at 549 item level) actually stronger than normal mode items, but on par with 2/2 upgraded normal mode items. Not to mention the flex, normal and heroic mode encounters would be easier to tune with a smaller gap in gear levels. Jumping 30 item levels on 1 heroic item is completely ridiculous.
As an example:
Heroic Twins (on 25 man before nerfs, which was a pretty seriously hard encounter during release) was tested at an item level of 535 on the PTR and felt pretty easy. Doing the fight in item level 525-528~ (which is what Method had) makes the encounter harder. Do they therefore make encounters a steamroll when you hit a certain gear level and make it "only" hard for people in gear that isn't up to par or do they make encounters "difficult" when you hit a certain gear level?
Normal Lei Shen was tested at 517 item level for reference. Do you need everyone in 517 to kill him? No, but if you do it makes the encounter a total joke. This is the problem with Blizzard's "EVERYTHING IS AN UPGRADE" mentality. It kills encounter tuning because you can't tune a boss to 566 item level when no-one is ever going to have that for a very long time. Scale it down. Tune encounters to 554 and heroic raiders in 541-549 gear will have some absolutely amazingly tuned encounters.