Item growing with character, yes please. It was a pity to ditch Braccus' Spear (and they are always harder to find at vendors, compared to other 2 handed) or that cool armor set. Or make them upgradable (increase item level) by crafting.
While I agree that items able to level up with the player -through exp or crafting, doesn't really matter- is a decent solution (since I suggested it myself) I'd really like to stress that it's secondary to the main issue, which is that there shouldn't be need to deal with such a brutal ramp-up in stats.
It's not just that it's hard to balance (and it is); the issue is that even if you manage to tune it properly, it's still such a weak, "game-y" thing to do compared to just having loot that scales a lot less.
I mean... What's even the point of it?
I often wonder about it when games do this cheap stuff.
Take Mass Effect for example. Every enemy levels up with you; the exp every kill gives to the player levels up with you; the damage you do scales proportionally with levels; the price of things is proportional to your level too...
At some point you have to wonder "Why are numbers even going up constantly when everything is keeping the same proportional ratio and every ACTUAL NET BENEFIT could be summarized in a far more limited increase?
What purpose does it serve?
It also marries really poorly with anything that tries to embrace a non-linear exploration/progression.
