Yeah, I like the idea of being able to choose your item. But, I think getting something for every single raid is a little extreme, I mean, it would be awesome but I think it would make it too easy. There is a reason it's called a "Rare" set. 
Perhaps tho this should be the subject of another thread. We've kinda gotten off topic 
True. Carry on 
I thought about the level cap myself but my issue is: What if someone really likes their set? What if they created it themselves and want to keep it for as long as they are active. At some point it becomes useless and they will be at a disadvantage against anyone that has a higher level/quality set.
I understand that it could be a problem. As it stands CK judges the quality of items and determines if they are of high enough quality to be used as a rare item. Now with the upgrade idea it could be possible for someone to create a junk item at a low level/quality and squeeze it past CK then upgrade it. To prevent this then perhaps when an item is reviewed a cap could be put on it. CK could say this item is only good up to level 50 and Uncommon quality and that's the highest that item can go.Or he could say that an item is worthy to be level 200 and Monstrous.
This way there still will be caps on some items but we would also have the opportunity to keep a set with us if it's good enough. Also if a cap is put on it the the person who created it knows in advance and has the chance to remake it if they wish.