Looting add's a ton to the game.
1) When you get good stuff you don't want to loose it so you get an emotional response when you do.
2) People won't be so stupid in PVP and charge in when they know they can loose items.
3) People cannot come back into instant combat unless they are prepared. (Death Penality could stop this)
4) It's a reward for spending time killing people and encourages world PVP.
All PVP games should have FULL loot and a death penality, any game with out is carebear. On those grounds even shadowabane fails as its only an inventory loot system.
If WoW created a server that had full item loot, FFA PVP, Deathpenalty and got rid of instances I would play.