Yes, it might seem to set up a huge perceived gap between 770 (“not good enough”) vs. 780 (“just as good as 800”).
For students with 760-770, it may actually be discouraging, because their scores are equivalent to 750 in this system.
If Caltech is mostly concerned about applicants with 780 obsessing over retesting until they get 800, I would think it would be better to simply have two buckets: “780+” at the top, and for scores 770 and below, just use the score.