Yep, that's the way to go - beautiful ( ) hand-drawn backgrounds and high quality models for characters, allowing the display of armor and weapons they are currently wearing, as well as a plethora of animations (even for actions such as drinking potions).
On a somewhat unrelated note, I'd like if there were fewer types of armor (sets) which are more unique (not necesserily enchanted). I think it's pretty pointless to change armor every hour for something 10% better.
Each set, and even individual pieces, should have their unique aspects - maybe the leather armor looted from a thug would lower the disposition of good, lawful NPCs, or the other way - a guard's armor would make thiefs hide their secrets from you; a plate armor could scare bandits, while an average citizen's outfit could be used to lure (somewhat provoke) a group of thugs.