I like it. It's a similar concept to Eve's long term character development, and Eve has some of the best player retention in the MMO market. You'll really be able to build on a character in the long-term with these reputation passives; as opposed to characters not having changed in the last 2 years.
I always thought the rate at which you could get "best in slot" gear was comically fast. Hell, it only took 1-2 days of hard grinding and you could have Mark XII borg stuff in every slot. It was a bit much, especially for a f2p game. It also killed the exchange economy at the Mk X-XII levels; since XII and Set pieces were so easy to come by.
I think people will get used to the fact that entry level gear at cap is now going to be Mark X or XI stuff. That's the way it should have been in the first place, and it shouldn't be that big of an issue for anyone, the difference is not in performance between a set of X gear and a set of XI or XII gear is pretty marginal.