I agree about the chests. I decided early on about which bonus set of equipment to wear and weild once I reached lvl 15, and sold the rest. I'm currently at 15 and still have 16,500 gold, and I choose the extra exp from quest.
Speaking of terrible loot... It's been 9 mths since I last played ED, and my memory is failing rapidly. Why are you stuck with Arben's Sword and unable to sell it? Is it bugged or is it quest related?