Crap. I backed this page and lost everything I wrote. !_! Let's try this again...
I think this form of system would be beneficial for KotL, and MUDs in general. It would allow you to develop a baseline for armour and either tone down customs, or tone up general gear so that customs are less of a necessity, and more of a nifty bonus(maybe even more powerful in general, but less so than current.) Look at the objects actually in the game, Chal. 99% of these will never be used outside of selling them for gold, that most of us don't even need because we don't have any need to spend it.
I'll use an example from Achaea, where mobiles don't drop anything except for gold, quest items(different from autoquesting, it'd be more like the mobtalk system we just got last year or so), and iconic shards(used for PvP objectives that most people don't bother with because... well, it sucks >P). Achaea armour and weapons are relatively balanced, and the only way to get them is through crafting(which in itself, in terms of weapons and armour, is a gambling game in and of itself).
You have to buy the commodities to make these armours, you can't get them from killing things, or mining, or farming. You have to get gold, and buy them. Steel at 91 gold per, with something like a chainmail(moderate armour for Sentinels, Druids, and Sylvans or something) costing... what, 16 steel per attempt. And each attempt can vary from utter crap(which is a loss of money), or an amazing piece of rarity(worth a small fortune). The gold drops in Achaea are pretty balanced against the costs of the economy, although part of that is player moderation.
I don't think crafting is viable in KotL, partly because of the population, and partly because as the skill system is set up, there's almost nothing stopping everyone from getting them and devaluing the concept of a crafting system. Going for a drop chart like D2, or GW, or all those other games, would probably be a better route. Yes, it'd be harder to balance the drop rates, but you'd have a -lot- more control over the baseline and be able to make really good rules for making said armour and weapons so that they'd be consistent.
And with enough work, it could be feasible for builders to insert a few armour/weapons with the very strict rules to add some unique drops to their area.
As an aside; potions, pills, wands, staves, and scrolls are in another category altogether... and for the most part, are worthless to even bother with anyway. This is partly their lack of power(staves/wands/scrolls) and limits on consumption(potions/pills vs hunger).
Also, a charted drop system would help to bring the gap in slots with availability rarity(wings/tail/shin/ankle/etc) up to par with available options, instead of requiring outright customs.