I love scarcity and low quality items. It fits the intro area very well. I wish there were more recipes/books to craft makeshift items early on. However, it would be nice to loot bodies for items worn and carried (armor, pelts, skins, weapons, etc.). If an archer is wearing leather and using a bow then those items should drop. Most drops could be damaged after the fight, worth very little, or scrapped/crafted to something better.
Having crap items makes finding your first decent weapon a real treat. Having few magic weapons makes the ones you get more memorable. Being unpredictable is part of the excitement.
The current loot and economic system isn't perfect, but I'm happy with it.