The problem with looting an item is that the game then becomes all about the no-drop items. You're instantly taking away I-don't-even-know-what-percent of the items out of camping contention that are going to be the most valuable.
I am intrigued by SPK's idea about FV itemization. Everything is tradeable... I think that has actually never been done on a pvp server and could easily bring in population. Plus most of us never played on FV, hmmm it has huge potential imo. Twinks would dominate at the levels they chose to stay at... it would change play style a lot over the time it exists.
Of course you could take them down and get a big item! Sounds pretty fun.
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