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Partly... it also fit the philosophy of the map I was thinking of making at the time.

On progressive items:
The biggest issue I have was in the inventory management needed for a party of 6-8... The way DS1 loot worked, I found myself stocking up on low level items with magical bonuses, even if they couldn't be equipped by most of my party yet. The idea was to have stuff available for when characters gained high enough stats to equip something better. I always made sure I had enough 0 requirement enchanted spell books before leaving the first town (the higher requirements for books bought later, with the same bonuses, never made sense to me...). My mages NEVER wore robes... ever. There was always better armor available. I didn't like the idea of making a pretty party vs. an effective one... and why should I have to choose?

If equipment could have a bonus when equipped, based on a character's crafting / equipment skill (or overall level), with some customizability (like choosing to add an attribute bonus, or elemental damage, or resistances... also scaled) then there would be a freedom not afforded by a rigid loot / equipment system.

Cheat prevention: hard-cap the possibilities (according to character levels), and link items to the character that crafted them (a taylored piece of armor would need to be retaylored for someone else...). This second idea would kill the possibility of a specialist party member though.

To make new loot worth something, introduce new base enchantments (ones not available for crafting enhancement) as you progress in the game, and don't recycle the same object models but introduce new ones as your journey moves forward... Also, make later items better to start with, in case some players don't want to do any crafting (but if crafted they'd have to be comparable to older items that have been manually upgraded).

An idea on how crafting could work considering the DS levelling system / engine: divide the potential crafting benefits by stats. Strength influences base weapon damage, armor thickness... Dexterity influences weapon speed, armor encumbrance (eg. give heavy armor an attack speed penalty, and dexterity crafting could reduce the penalty)... Intelligence influences the type of magical enhancements possible... Each item could be crafted by each of the three disciplines, encouraging a well rounded character. Have loot dropped "pre-crafted" in 1-2 of the disciplines, so specialists wouldn't be completely crippled by the system...

/rambling