I usually advocate realism (er, realism in an entirely fantasy world + loads and loads of magic, but I mean make the fantasy and magic make sense, stand serious scrutiny), but this is one thing that's far too bothersome, considering how much of a stingy pack rat I always am. I'll very gladly "forget" about all that realism thing if it means unlimited inventory (a la Gothic, but would be nice if tabbed per type, though of course also including an "all" tab, not being forced to look through one by one if you want to see all)...

I can deal with limited carrying capacity on the character IF there is unlimited storage available elsewhere, and you can teleport there at any time, from the very start of the game, at no cost. (Plus, of course, being able to drop stuff and then pick it back up, at least as long as you don't leave the area, since some mentioned the Witcher issue.) But without that option it's terribly frustrating.

"We're all humans." Let's try to be more!
"The chief obstacle to the progress of the human race is the human race."
"If you're falling off a cliff you may as well try to fly, you've got nothing to lose."