This system is insanely complex.
Any complex system is going to be abused.
If the system is not stupidly simple, it is not going to happen.
I'll take a stab at simplifying it. Items have three tiers:
Tier 1 - stuff you can buy in the main shops (milky, recall, plain long sword, bronze shield). they are bound to the character, cannot be looted, and you still have them after you die.
Tier 2 - unlimited pops (sense life, infravision, det invis, held autofly, +1stat, -1save, +1hitroll hands, 3d4 prime, 2d6 offie, 5d5 2hand, 3 or less rp to simulate, worn lights). cannot be looted except by player, groupmate, clanmate (item will zap).
Tier 3 - limited pops (+dam, +heal, 4 or more rp to simulate, 4d4 +/+ prime, 3d5 +/+ offie, 6d5 +/+ 2hand)