loot should be by chance, higher chances of good stuff on tougher enemies, or in difficult to get to areas.
I also think that skills, such as blade, should be just one side of the coin. Each usable item should have it's own mini skill bar. use a certain sword for an extended period, and you'll get good with it. switch to another blade, and some of your skill remains, some you need to relearn with a new weight, length, balance and such. Higher blade skill means you adapt faster to new bladed weapons (gain more weapon Experience (WXP) per strike. With this kind of system in place, you could make relics and higher level items tougher to learn, making them less useful for characters who just aren't skilled enough yet, offsetting the "find epic gear early" phenomenon.
just my 2 cents on the balance issue, and that's how i'd do it, were i given the option when making an RPG of this size.
I like this idea a lot. I've envisioned the same basic thing - that higher level weapons would have, in some form, higher skill requirements, simply so that lower level characters can't gain much if any advantage from using an uber weapon. That not only settles the balance issue (which, by itself, doesn't really matter to me - people are entitled to play the game as they please, and while I think using an uber weapon ruins it, the fact that I have to rebalance virtually every weapon mod I use before it's not uber implies that I'm in the minority on that), but just makes more sense to me. I've often thought that if there were a way to do it, I'd make it so that a low level character is actually less skilled with an uber weapon than with a normal one, simply to represent that it requires more to use it. Sort of like the difference between driving a Ferrari and driving a Hyundai. But I
really like the idea of each weapon having its own sort of internalized skill requirements and thus each weapon requiring at least some time to learn and be able to use well. Even if one switches from an iron to a steel longsword, they're going to have different weights and different distributions of the weight and they're going to handle differently, and that would represent that. And yes - tie it in to overall weapon skill, so that a highly skilled fighter would require virtually no time at all to learn a new weapon while a lower-skilled one would have to struggle a bit. And in addition, I'd like to see weapon damage FAR more dependent on skill, so that a relatively low level weapon in the hands of a skilled fighter would still do decent damage AND a relatively high level weapon in the hands of a lousy fighter would still only do poor damage.
With that sort of complexity in place, then it becomes less important to load the game down with contrivances to try to keep high level weapons out of the hands of low level characters. Then it could just be set up logically - high level weapons are generally used by or guarded by high level creatures and/or are in difficult to reach places. That all makes sense, simply because if they're readily available, one of the thousands of people in the area would've already gotten them. They have to be hard enough to obtain for it to make sense that nobody else has attained them yet. But then if some player figures out some exploit to get his hands on it early - that's fine. It's really not going to do him much good anyway, but it'll look cool, so more power to him.
And to the heart of the OP - I dislike leveled quest rewards. They should be fixed and the difficulty of getting them and likelihood of finding them should be keyed to their power - enormously powerful items should be well-hidden and/or well-guarded, while lesser items should be easier to find and/or obtain. Completely aside from any issue of balance, that just makes sense.