As someone who has been playing Gnar a LOT recently, and who really enjoys him, I have to admit that he's probably slightly overtuned at the moment. That being said, I think there are easier places to nerf him than his damage. Gnar's kit is overloaded with a lot of unnecessary stuff. Before touching his damage, I think Riot should try to reduce some of his blatantly unnecessary forms of power and see how it turns out.
A few examples:
-Hyperactive does magic damage. You mention this in your post. It should probably be changed to physical. At the moment, it's by far his largest source of sustained single target damage. In lane, if you build armor, he is going to tear apart your health bar in Mini form, and if you build magic resist he is going to burst you in mega form.
-his Q has an absurdly high max range. Mini gnar is supposed to be high risk/high reward, but once he's level 9, he can spam this thing pretty much non stop from halfway across the lane at no cost to himself. Reducing the range would force Mini Gnar to put himself at more risk to poke while in lane, and it would also make slightly less difficult to catch.
-hop is the biggest offender, in my opinion. Hop is an disengage/initiation tool, pure and simple. It has a relatively low range normally, and a high range if you hop off of something. That's plenty of power already, but for some reason Riot decided that hopping off enemies would deal damage, slow the target, apply a hyperactivity stack, and grant him an attack speed boost upon landing. All of this is totally unnecessary; removing it wouldn't effect the abilities core functionality at all, but it ultimately would shave off an easy-to-underestimate amount of excess power.
-Gnar immediately gains the move speed boost of hyperactive upon coming out of mega gnar. In my opinion, he should not. Playing Gnar well should be all about effectively managing your rage bar. If you aren't paying attention, and end up transforming back into mini gnar in the middle of an enemy team, you should get punished for it. The instant move speed boost mitigates a vulnerability that Gnar should be avoiding on his own through smart play.
