Only gear should play a role in the power of a player. Gear quality would be increased as normal, by raising other stats. Otherwise hand-me-downs can be bought from bigger players (so you can join mid-world and still be competitive). Gear should break easier and be much more difficult to craft. Gear durability should be tied with the stats/armor you get from the gear, so that looted gear isn't nearly as useful as freshly crafted gear.
Also, gildings = good example of gear crafting (you can always continue working on the same set of gear to make it just that little amount better, thus good competitive gear becomes much harder to craft and more worth), armor = bad example of gear crafting (you can mass produce armor at the quality your industry is at, at that moment, thus armor is basically worthless provided everyone is at a competitive quality)