Misc equipment needs a hard cap, as do potions.
The encumbrance system is near meaningless for heroes, the max penalty is tiny, removed entirely by a mount, and easily bypassed and then some by other hero gear and a few levels of traits.
It's slightly more relevant for regular units, where their initiatives are constrained and trait slots are limited, but it does not scale to hero abilities well at all.
The design on this feels really schizophrenic, like they can't decide if they're trying to make a full on hero questing rpg or an empire builder with grand armies clashing - so you wind up with absurd minutiae like encumbrance while considering city development at the same time.
Encumbrance for heroes needs to be reworked or tossed, its a fiddly bit of non-relevance right now, much like imbuing heroes.