So im not really sure how drop rates work but i know what drops stuff i like, where the best gold farming was, or good hunt spots etc.. In THIS game i think there is a simple system that could work very well.

See, as you level up you dont really feel inclined to start fighting more challenging monsters, you just get better at fighting what you know. I've noticed they just arnt worth the EXP for the time to kill them or how dangerous it can be but i think that suits the game just fine.

Ideally, Drop rates should be broken into tiers of monster difficulty, not sure if you have to hand-set their drops or what.

Lets say stuff like Ice Trolls are a nice medium difficulty, easy to kill, good exp and great farming value.

Now higher level mobs after that, they just arnt as good for farming gold or exp, but should compensate by higher tier drops. Dont expect us to farm them for exp, they're dangerous and slow to kill, we only go to these harder mobs for higher tier loot.

Casters, having access to our spells, are extra dangerous for farming since they can burst damage you from a distance. This should put them on a slightly higher loot tier VS melee counterparts.

So yeah, i dont know if you wanted us to level off of strong mobs, but i'll farm knights and guards MUCH more efficiently than risking my neck against a palaind or crusader. The exp/gold is not worth it, but if they drop nice stuff now and then they'll have a place !

 

So i guess thats it, some places/mobs are better for exp and some places/mobs are harder and really meant for treasure hunting dat phat loot.

I agree with this, 

getting 3 ice trolls is better than getting 1 yeti.

its faster, more gold, xp, and items. (and much more safer)

 

its not worth taking risk on getting yeti, reaper or high lvl monsters.

I started getting ice trolls at lvl 35. and im now 65 but still

cant find better place to farm than ice trolls.

 

accoring to this link, there are 3 levels of items.

http://www.fantasyrealmonline.com/PlayersGuide.aspx?Section=MagicWeapons

 

let high lvl monster drops only lvl 3 or so, it will make them worth killing.

(not just weapons, all other items too)

 

 

Not to mention rings/amulets, which should be on an even higher rare tier since they last forever.

Just keep in mind Ice Trolls are only going to drop low/mediocore magic items... Sure they may be good for that and Yetis may drop magic stuff less frequently but when  they do it will generally be much better than an Ice Troll's loot.