Most people play for gear progression more because that's all they know rather then that's the biggest reason why they play. Why do you think so many people play WoW, the MMOG with the most fubar gear system in the genre, because it's all most people know, since the vast majority of it's players simply have never played anything else.
IMHO the problem with AoCs advancement isn't loot, I applaud the reasoning besides loot being a small part of the game and that it's PvP is the most skill oriented of it's kind (especially in 1on1 battles.)
The problem is and always has been that skills themselves have little impact. If they fix skills it will fix loot, it'll fix some of the large issues in PvP and make the game better as a whole. The problem isn't that gear doesn't matter (much,) it's that the skills behind it provide such insignificant benefit 90% of the time that the loot itself is less important as a whole, not vice versa.