That actually sounds like a vrey nice and worth thinking through idea. Only flaw I see is that you'd have to get rid of any and all possibilities for players to trade money/items for items with other players. Means no dropping gold/items to the world and no direct trading interface. Otherwise the players WILL circumvent the NPCs. Still the basic idea looks good to me.
There is no need to eliminate direct trade. the result would be that players would do direct trades that cost less than what the NPC charges. That's a good thing. It would be a stupid player who would actually pay more for something in a direct trade that he can get for less from the NPC merchant.
The ideal direct trade price would be higher than what the NPC merchants pay out, but less than what they charge. But so long as EVERY item has a fair market standard price, then the prices players may charge for direct trades are kept under control.
The idea is not to remove freedom of trade, but to make sure that freedom of trade is not abused.
If i find a bunch of crap swords durring a dungeon crawl, I want it to be like in the regular Elder Scrolls games. I want to be able to go to a merchant and off-load my junk for a guaranteed price. As long as I get my money, I'm not going to care how much the merchant is going to resell the wares for.
The important thing for a viable player-driven economy is to make sure that whatever can be looted can also be crafted. Even epic loot, as subsequent end-game extensions are rolled out. While a piece of end-game content is the current one to go to for a bit of loot, it should be loot only. But when the next piece of content becomes the latest and greatest thing, then I see no reason why the previous content's loot shouldn't become craftable. Maybe it has a different look, so its clear who earned it by playing the content and who just bought it, but the more accessible gear becomes, especially if it isn't the current best in slot gear, then the more people will be inclined to go after it.
As many steps to keep players playing together should be taken. Otherwise you end up with elitism. "I did this raid so I'm better than you." How many horror stories are there about raid groups who reject people just because they don't have a high enough gear score? Level the playing field at the entry point of top-end content, and you will have more people willing to participating in it, and fewer people turned away because their gear isn't good enough.
Heck, Gear stats play a major role in the elder scrolls core series games, and only a fool would think the same won't be true in an MMO. But the more effort the developers put into creating a level playing field for whatever is the top-end content, the more cohesive the player base will be within itself.
So yes. If it can be looted, it should also be craftable, except maybe for the absolute best gear. But if second best is craftable, then whether I buy a sword from a merchant who bought it from a crafter, or if I won it from the last raid, It's just as useful for going after the latest best.
Now a guild can still put a prerequisite on who they let into the actual guild based on whether or not they have completed all current raids. But if a guild wants to do the latest raid tonight, but not enough people are on, then there doesn't need to be an unrealistic bar to forming a pickup group, even if those who join to fill out the group bought their gear rather than having earned it in a previous raid. Now if I was the guild leader and one of the pickup guys wants to join, I would say, We only accept members who have done all the raids and have earned all raid gear, and when you've done that, come back and see me. It allows a guild to maintain a standard while not restricting the potential of forming solid raiding groups.
Just to clarify, if I was that guild leader, I would encourage a mentoring program within the guild where members help hopefuls do the prerequisites. It helps when everyone has experienced everything, so nobody is clueless on something.
I would also lke to see a raiding loot reward system that pays out gear pieces in a fixed order, rather than just random drops. So maybe it goes in this order:
Armor, Boots, Gauntlets, Helmet, main weapon, secondary weapon, Bow, shield.
So that's 8 playthroughs of the raid in order to get everything. And in the raising ceremony of a potential new member, I would call upon the candidate to "Present Shield!" and when he does, I would say, "You are hereby recognized as a worthy member of [guildname]. Welcome [brother/sister]!
But if someone has never played any of the preceeding raids wants to join my raidgroup, and he's max level and geared up correctly, I won't turn him away.
A lot of people don't even bother with raiding because of all the elitism at the top that is only encouraged by gear that can only be obtained by raiding.