If good loot dropped a lot then there would be to many of them, and then the good loot wouldn't be worth any money because the AH would be over saturated with them. Blizzard made it like this so they can make money off the real money AH, and yes it is a **** design, but how would the real money AH work if it wasn't like this?
The thing is though the good loot dropping is way too low. If they wanted to make it some great gambling game they have to give the perception that your winning some of the time. With Diabo 2 you got set and legendary items more often, even if those items werent that great. Set items compel you to play more to complete that set.
If I was going to make this a gambling game I'd have all kinds of rules to keep players playing. Make it drop low level set items and decent items every so often at certain frequencies depending on how long they've played. You dont reduce the drop rates so that they are forced to trade, you have lots of items so that people want to trade. Make the game compelling to play with whatever drop rate, then make loads of items so someone cant possibly get them all on their own.
I dont know, it seems like the AH is even at odds with the game. You play to gamble with item drops, and buy from the AH so that you can play to gamble with item drops?
I'm not sure whether to wait till the patch 1.03 comes out with the better drop rates(although they arent much better), or keep playing because the RMAH is probably going to ruin the game anyway.