I'm playing as a Redguard Knight, and I'm four staff pieces into the game. By far the most tedious part of the game has been managing my inventory in dungeons. My approach has been to take everything I see until my inventory is full, then drop everything non-magical. And if everything in the inventory is magical, then drop everything that I know right away is not valuable (like weapons and armor with only -1 or -2 AC). And if I'm not carrying anything that I know is worthless, then I save, go back into town, sell everything to find out its worth, then load and drop anything below the median value.

Anyway, I have accumulated vast wealth with this method, and have travelled the world to buy best-of-class items. I *think* that I am now as well equipped as I ever will be and can therefore stop searching for treasure in the dungeons, but I want a second opinion. I have this:
Ebony Greaves of Personality
Ebony Boots of Agility
Ebony Cuirass of Jumping
Ebony Pauldron (L)
Ebony Pauldron ® of Luck
Ebony Gauntlets of Speed
Ebony Helm
Ebony Tower Shield of Agility
Ebony Blade
Ebony Dai-Katana of Passwall (side-arm)
Ebony Long Bow of Luck (side-arm)
A bunch of spellcasting items - I made a separate topic on this
Ebony Bracelet
Ebony Belt
Ebony Torc
Ebony Amulet

Is this as good as it gets? Can I play the game and not worry about the whole inventory managing aspect? Also, my stats are, including equip bonuses (and the Oghma Infinium):
Str: 83
Int: 43
Wil: 69
Agi: 89
Spd: 79
End: 82
Per: 78
Luc: 78
HP: 236
Stamina: 165
Level: 16

I've never played the game, but a quick glance at http://www.uesp.net/wiki/Arena:Base_Armor tells me that ebony is the strongest material in the game, so unless anyone else says otherwise I'd say you're set.

Yep, that's as good as equipment gets. Spellcasters late game can be troublesome for Knights in some ways, but you should generally be fine.

My spellsword found an Ebony Longsword in the starter dungeon. Of course as I understand it there's no way to view the durability of a weapon in Arena, so I'm extremely paranoid about getting it repaired all of the time in spite of the cost.

You can right click on an item and get its condition as well as other stats in the equipment window.