To me, the lack of YP discount on 1st Anytime/Off Peak tickets doesn't present too much of a problem, as walk-up 1st tickets for journeys over ~30 miles are often so ridiculously priced that I wouldn't even consider them with a discount.
Example: Crewe->Lancaster is £63.
Manchester->Birmingham is £95.
London-Kettering is £78.50
If people of my age have that kind of money lying around then they're probably going to buy the first class product regardless of whether there's a discount or not. I don't think the number of 16-25 year olds buying 1st walk-up tickets would change much if there was a YP discount available.
By contrast, a journey for which I have bought tickets quite a few times, Sheffield to Derby:
Off-Peak Day Return £11.30
First Off-Peak Day Return £16.90
With a railcard the CDR is £7.45 - which is what I buy. But if the railcard 'worked' for First Class I would buy the £11.15 ticket without question.
Another one I've done is Edinburgh to Dundee:
Off-Peak Return VTEC ONLY £27.30
Anytime Return VTEC ONLY £28.50
First Anytime Return VTEC ONLY £48.00
Add a 16-25 railcard and the Standard tickets become £16.10 and £18.80 respectively. Clearly that's going to win against £48. But, add a Senior Railcard and the First option is £31.70. At only an extra £7.50 or so each way I wouldn't hesitate.
Hereford to London is a 3h journey, if I were on direct trains, Off-Peak with GWR's fancy new First Class, if my railcard worked for First I would quite happily buy the First Off-Peak Return at £79.55 rather than the £35 cheaper Standard ticket should I have decided that's what I wanted. Under £40 each way is great value for that, and an extra £17.50 on a single journey is good value for a service with such a plush First for such a long way. Unfortunately it would be silly of me to buy that ticket for full price at £120.50 against the railcard discounted £44 in Standard.