Other than bosses, Enemies DO drop the proper loot types. Animals drop bits, never swords.
Here's an old, but relevant link to this topic, I think.
Actually, balancing and creating meaningful treasure tables is probably more work than placing treasures/items by hand.
But once the treasure generation was in, and containers could contain something, and there was a chance of something cool dropping, you immediately felt it when you were playing it.
It may sound cheap, but item fever works, even in a game where combat is TB. This was also proven by the journalists that got the hands-on previews: they all immediately started opening things. And if an NPC was watching, their curiosity got the better of them and they were trying to make him look away or lure him off or distract him in any way (most of them ended up killing everyone, but that's besides the point).
So, in short: item gen is in, because we believe item fever works and can be fun, and is one of the things that helps replayability. But not ALL drops are generated, and there are items that are hand-placed.
But we do also know that balancing those treasure tables the generate loot, is the hardest part.
