No Drop is a method to limit an item's rarity. You can limit it in various manners. But, if the item is "valuable", then you must limit its distribution in some manner. Or you end up with the "everyone has it" syndrome, and it's no longer valued.
If your item drop from a dungeon boss that respawns every time you enter a dungeon, and that has as many copies as there are group seeking it, then, by nature, it ends up common as crap. And thus, it IS crap. Having valuable items that weren't nodrop in EQ worked because the items were limited by a respawn rate/chance with only one chance per 26mn/52mn per server. Having tradeable items in a game with instances makes them common and valueless however. It's one or the other.
It's not one or the other--you could simply have it be an extremely low drop chance. Imagine if in a particular tier 1 raid, you had 2 versions. Instance and Community (You pick at the start of the dungeon). In the instance version, the bosses all dropped, lets say, "Tier .5 loot" (So Tier 2 would drop Tier 1.5 ect). It's decent, it's an upgrade--but it's well below tier 1. However, each boss has a low chance, say 10%, to drop tier 1--rare enough that you will typically see ONE or two rares, per raid reset (Maybe even have it be a rolling chance, so each boss you kill that doesn't drop one, increases the next boss by 10%). However, because none of these "tier 1" pieces are bound, if you get duplicates, of say, cleric gloves--you can go ahead and try to
tradethem for warrior ones. (Increasing interaction with other guilds or groups)
ALSO, the community version of this raid, would ALWAYS drop tier 1 loot--giving a distinct advantage to doing the community version of the raid--the down side is, it can be camped, and spawns won't always be up.
Now, eventually, yes the market would saturate with these items--even if their drop rate was low. But that's okay--the developer should not be interested in keeping them rare
forever, just rare until 2 more tiers of content comes out. Then you simply allow that old "Tier 1" to become mudflated, because you WANT it to be "somewhat" common by the time enough new content is out, because you want it to be easier for new players to gear up with a minimum standard suit. And instead of having them do tokens, and shit, for their suit, you can let them make money in the economy and buy it from other players (Of course this would take a tiered economy to control farmers and gold explosions)
This is the real magic behind very rare, sparse, equipment. This kind of rarity couldn't work in WoW BECAUSE of no-drop. But in a game that didn't have no-drop, it could. No-drop was one answer to farmers...It might not have been the best one, or maybe it was...I don't know, the point is there are MORE answers out there, they just haven't been tried but it's entirely possible.
Also Edit : D3 "kind" of tried to use this system, but they botched it with fully random affixes, and no lock outs--you'd need to have a high enough drop rate so people CAN see the items they want at least once a full play session (Even if they might not get it because they are in a group) BUT you limit those play sessions, or access, in the way of raid lock outs , to keep control over how many items go out. D3 kind of just let you grind, and they had to adjust the "perfect" drop so low, people often didn't see a good drop for weeks---that's too frustrating. There is a balance that can be struck in MMO's because of how drops work, that can't in the Diablo Genre. (For dungeons you couldn't do lock outs, because you don't want to limit your player pool in groups--so you make instanced versions simply have a very very low chance to drop things, but make them the keystone of your tiered economy, where as in that's where you get money but it requires a full group)
