IMO, raid difficulties should be reduced to 3, not 2.
LFR has its reason for existing, and absolutely should stay. At most, the "outlier" loot (e.g. tier pieces) should be changed, but that's it. While a tourist mode, it should at least give some semblance of reward.
Next up would be Normal, which would retain a "flex" raid size, which makes it easier for more casual guilds whose rosters have spottier attendance to form groups on any given raid night. Tuning-wise, it would go from current Normal mode encounters to early-mid Heroic encounters.
Finally would be Mythic, or Heroic if you REALLY needed to rename, and it would keep the current static Mythic raid size, for sake of easier tuning. Early encounters would be similar to current late Heroic in difficulty, as they have been for some time now. and bump up to the equivalent of current late Mythic encounters, so effectively no different from now.