I think it would only cause a lot of opportunities for frustration, both for the players who want a challenge and the loot-hungry players who will dive into a difficulty they're not prepared for. I still get newer players on Nightmare who die frequently, but feel they need to ride it out for Exotic weapons. They don't understand that experience will impact their performance more than meta weapons, and pollute pubs.

I'd rather they improve rolls after a certain player level than give incentives for more people to run Cata.

I like that idea.
I host pub cata and there is rarely any round without s1 around lvl 50.
You already get lowlvls on cata without the incentive for cata.

Not a problem, add a popup "you must gather your party before venturing forth" message when someone tries searching for a cata game solo.

You sometimes have 1 red on nightmare so having 2 reds on cataclysm sounds reasonable.