I like the title :P
At the start, was that wrathion?
Heres my thought. The quest chain was designed in a way where it would not impede in a normal raid progression for anyone (LFR/normal/Heroic) and its very much a personal quest like you mentioned. I think that is fine, as long as the quests are designed that way. (If it required the raid to go out of their way for someone to get the gem, then that would cause problems, especially in LFR where there is very little organization.)
The PRESTIGE of organized raids are still there, different gear, titles, mounts, and especially the feat of strength that is being added. That prestige is very much a guild effort in my opinion. Obtaining a legendary, was very much a personal prestige. Either by being picked as the one to get it, or forming your own raid so you can get it, they have always been very personal in my opinion. The problem was that in order for someone to get that personal prestige, the group had to be 'sacrificed' somewhat.
Now that the quest is personal, and does not impede on the raid itself, people with dedication to their character throughout the expansion will be able to get the legendary (I am assuming that there is a 'real' legendary' at the end of course). Who knows what kind of personal quests blizzard is thinking of putting during this quest chain? (They obviously put a lot of thought into this).
I think it makes it clear where to feel 'prestige' from. (Personal vs guild effort)
However, I'm worried that this may discourage people from changing main characters in the middle of an expansion.
EDIT: If a person has been working on this quest line for an ENTIRE expansion, (or at least up to the last patch,) then I think that person showed enough dedication to be 'awarded' with a legendary. I'd even argue that its the most effort that had to be put into a legendary, even if it was available through LFR. (At least the most 'time consuming' one)