The greatest problem that they had with rewards, Barry shares, is that itemizing a dungeon across a huge level range became a massive headache, requiring them to make "a prohibitive" amount of items. Instead, the LotRO dev team is taking a cue from its successful skirmish system, and reprogramming the scaled-instance mobs to drop tokens instead of loot. Players can then use these tokens to purchase armor sets, cosmetic items and even legendaries.
Barry spends the rest of the article discussing the stat-tracking feature (again, similar to stat-tracking functions with skirmishes) and how the team went back through the dungeons to raise the quality of the entire experience where needed. You can read the full dev diary over at Lord of the Rings Online's site.