The reason for this is that 4* items continue to gain power until depth 28, just as 5* items do. Basically, items receive power as you go downwards, but stop at a point. In short:

5* = gains power till the core
4* = gains power till the core
3* = gains power till the end of T2
2* = gains power till halfway through T2
1* = gains power till the end of T1
0* = gains power till halfway through T1

This was likely done so that weapons like winmillion, heavy deconstructor, khorovod (which lacked a 5* at release) and radiant sun shards (which also lacked a 5* at release) could be used into the end game viably. It could also have been intended to give 4* knights a buff earlier on, since the upgrade to 5* used to require about the same amount of effort as the cost crafting up to 4*. Allowing knights to compete in the end game prior to completing their gear is a good idea, as there is often very little reason for them to continue playing once they are done.

Regardless of why, the heating cost used to be almost instantaneous- you crafted an item, it would heat itself, you didn't have to think about it or farm for a week straight. This factor being removed is really what messed everything up.

It's supposed to motivate players to start trying out the deepest levels (to get Rads), and to get Paying players to pay OOO's employee wages :p

I don't believe you. I think it's at least as likely if not more so that this whole business was an accident, and that the developers never intended for 5* weapons to be worse at any point. If you have any sources to back this up I'd love to hear them, because it's one of the larger things that people have been wanting to know.