A problem with that solution is that the loot system was so garbage that you could likely go through multiple playthroughs without finding a single decent item for your character. At least when I played, most uniques were completely inferior to highly rolled magic items from the end game.

It was basically at the point where your only real choice end game was to grind gold to buy items, it wasn't even worth it to try to search for items.

I had the idea of limited-transfer items. For example, an item can be bound to three characters; once the third character picks it up, it's non-transferable. This would let me give my friend the bow I don't need, or even sell something once, but items wouldn't be infinitely fungible any more.

"bind on equip" and "bind on pickup" are terrible ideas for games like Diablo. Trading with friends, strangers or your own characters is part of the fun.