There's no reason a more intelligent system shouldn't be used and it doesn't have to result in a 'participation award' system - it could even make things, on average, much harder, but be somewhat less frustrating and unpredictable.
We've all been there: some guy gets a great drop first time, but you kill that monster X times over the next Y hours and get nothing. Neither the first guy getting the item with barely any effort, nor you not getting the item after a ridiculous effort were fun or fair.
I like the related idea of an alternate currency, it could play quite nicely. What if, when you defeat Orcs from Orctown you get a growing pile of Orctown Scraps? What if there is a vendor in town that wants Orctown Scraps and will buy them for small amounts of cash or build various items from them, from more mundane Orc-themed armor and weapons to more exciting stuff if you bring a huge pile? There could be a couple of different 'grades' of Orctown Scraps - Orctown Boss Scraps and Orctown King Scraps that he can make magical weapons from.
You get the idea. It would apply to various areas (Dragonmount Scraps, Swampgoblin Scraps, etc) and have various vendors.
You could also have a General Scraps pile that grows as you demolish opponents that perhaps can be used to repair your own gear or can be vendored for small amounts of cash. It's always been annoying to have backpacks from of various 'scrap level' items. Why not make it more orderly?
Let's face it, having snakes drop copper pieces was hardly more sensible, though it did cut out the middle man, but then you'd amass ten stacks of snake scales as well and have to go sell them to the local wine merchant (or other totally inappropriate vendor). Was that fun or immersive?