Equipment progression isn't a bad thing. It's not a good thing either. It's largely an unnecessary thing. Narratively, it's particularly weak. I don't recall any of the heroes I'm familiar with picking up new swords out of every cave or doing comparative analysis to see if the enemy's sword might just be slightly better than the grand one the king just gifted him. And in the case that the enemy swords are weak, he tosses all of them in a sack to lug around to sell to the local smith. But maybe that goes on in the stories I haven't read.
Even outside of the narrative consideration, it doesn't actually bring much else to it. If we're talking about weapons with unique properties that make them stronger in one sense and weaker in another, that's all good. But 9 times out of 10, they're simply all around weaker and the sole purpose they serve is to be turned into cash later on. That's not an intelligent system by any means, it doesn't add anything of value.
I don't remember cycling dialogues in epic poems. Or people picking up fetch quests. Or... you name it. They're designing a game. Narrative comes second to the enjoyment of the player. As for your second point, I'm not sure why 'most games do it bad' is a justification for not trying it at all. I also wouldn't want DA2 to be structurally similar to ME2 since they have largely different game mechanics.