I gave it a thought and I agree with you guys, it's better to have next bid step as 5% of the current bid than of the BuyNow price. It is really cutting number of potential participants and decreases the flexibility of pricing.
Example - Armor, current bet is 800, BuyNow is set to 4000. So the next possible bet is 800+4000*0.05=1000. If noone is willing to pay a 1000 - seller will get only 800. But if the increment was 5% of the current bet, situation would be following 800+800*0.05=840, perhaps someone would even bet once more, so the seller would get 840 or ~880 gold. Perhaps even ~920. So we have a much better flexibility to determine real price of the item so the seller can get the best possible offer.
Devs, please give it a thought.