What they should do is cap ilvl based on content completion.
If you have a mace (doesn’t matter where you got it!) and you walk into M+, and you haven’t done anything in M+ before, that mace is gonna start out at the lowest ilvl. As you do stuff in M+, the mace’s ilvl in M+ goes up.
Repeat for raids. The same mace goes into raid with you, the more you do, the better the mace gets.
So somebody who does a ton of raiding, but very little M+, is going to have a higher ilvl in the raid than in the dungeon, befitting their greater completion in that content.
Avoids the “too many items in bags” problem.