Nice ideas. Regardign the buying and selling of equipment, perhaps it would be interesting to have a mechanism whereby you could sell and shop for player owned equipment in market places of towns.
Over a long game, one or two centrally located cities might become the logical places for such markets to thiive. If you physically moved the items to this town (via hero or soveriegn) you could them put them for sale on the market at a set price (or use a bid/ask system, perhaps timed). That way you might end up with some unusual item which first was taken from a dungeon on a far off island, or you could sell your duplicate dragonclaw tipped dagger. Such cities might be so beneficial to all the players that they eventually are recognized as 'protected' market towns which people would be reluctant to attack, though looting such a town might allow you the chance to obtain some of the items for sale there. The owner of the town could also be allowed to tax such sales, so settign a 3% tax rate would draw more business than a 15% tax rate. If such game mechanics made some towns very profitable to own, they diplomacy involving these towns would be potentially interesting.
As an expansion on the use of items, since we know that soveriegns will be able to craft special items, perhaps they could ALSO 'improve' items which you find in the course of the game. You might be able to add some characteristics or powers to items you get from quests or dungeons, maybe adding an elemental attack of the type of your node in the town where your soveriegen resides. Death mages could make weapons more deadly, life mages add defensive properties or heal abilities.
If each soveriegn had semi-unique crafting abilities, then a really rare item might be one which multiple soveriegns had added special abilities to. It would also add to diplomacy if you agreed to trade special items, each enhance them, and then return them. Or you promise to put enchantments of items in return for a treaty you want. If you get an enhanced item as loot in battle then you could also make it even better.