The paper LER that is considered to be in the middle of the range for grade 2 paper printed with a diffusion enlarger is 1.05. The LER is determined between the points 0.04 over Pb+f and 90% of the paper Dmax. Clearly the 1.25 negative density range doesn’t fit a grade 2 paper. But many Zone System practitioners swear that they use something close to 1.25 for their testing range and their negatives fit well on a grade two paper. The reason for this is the 1.25 negative density range comes from a no flare test and the prints are from negatives made in a camera with flare which reduces the negative density range.
1.05 is my aim. I don't quite understand where the traditional 1.25 came from but I have heard many practitioners choose that. Your explanation makes sense.