Personally I like items that give characters unique abilities. In that way the always remain relevant.
As for passive bonuses, I'd love the ability to upgrade items to keep them relevant to my level.
An interesting idea would be that certain unique items can level up gaining new abilities as they do so (or, even better, you can select from a small pool of abilities to add).
This wouldn't need as many levels as a character but, if max character level is 20, you could have 4-5 item level ups. These unique items should be obtained from story or side-quests boss fights.
