Ghostcrawler is discussing two possible solutions. One is purely cosmetic, adding kilo- and mega- prefixes. The battleplate above would have 62 K armor, and a fireball would do 6 mega-damage instead of 6 million damage. The other solution would be a complete revamp of all existing gear, adjusting the stats of all mobs accordingly as well.
I do like the revamp idea, because it might help with some of the current "bumps" in leveling. People tend to spend a lot of time at the level cap, so each previous level cap has lots of content in the form of daily quests and dungeons. But every expansion starts with a huge gear stat inflation, so the hellboars in the first zone of the Burning Crusade drop green gear which is better than the level 60 epics from the level 60 levelcap content. That might be a necessary evil at the time a new expansion hits, but years later it is just an annoyance in the leveling curve. People change into the next expansion content as early as possible, because it is gear-wise better to do Burning Crusade content at level 58 than to do the old level 58-60 content. If Blizzard were to revamp the item level vs. character level curve, they could remove these bumps in the curve and make the leveling experience smoother, using more of their old content.