Ha! Nice job, and as usual, the accompanying commentary is my favourite part.
The best games I've ever seen in terms of sensible loot have got to be the Etrian Odysseys (1 and 2) on the DS. When you kill something, it drops only bits of stuff that you'd expect it to have, usually parts of its body: Moles give you "soft hides", carnivorous flowers give you "giant petals", and so forth. You can turn all these things into money, back in town, and then buy swords, armour, and other goodies -- the critters in the dungeon don't walk around with that sort of thing. (OK, so it's a bit of a mystery why the vendor in town is so eager for petals and bits of fur, but at least the monsters don't hork up full suits of plate mail when they die.)