Excellent, at least you can sell it.
Now, I understand the theory. But I played for 5 years on EQ's "Firiona Vie" server where 99.9% of items were tradeable. I don't care about the low level game, so maybe those are valid concerns and maybe they are not. But speaking of the max level game, first off, crafted gear rarely competes with top level group or raid gear, or to be more accurate, crafted gear using group-dropped crafting components isn't as good as the best dropped group gear, crafted gear using raid dropped isn't as good as raid dropped gear.
Anyway, as for raid gear, you did not have a situation where everybody got raid gear without earning it. Top level raid gear was simply not sold while it was current or even usually sold during the next expansion, it usually didn't even get sold until 2 expansions later and even then, for MAJOR plat. And no one gave away raid gear for free, with one exception: serious raid guilds have hand me downs, but that is good for the game in my opinion. Even then it only occurred when the guild got a drop that made that old piece available.
But, I guess I can only sigh and realize that game companies just don't accept that this is a workable way to do things.
So I will ask - is the crafted gear, both made from group and raid dropped components, actually any good compared to the dropped gear?
There are a few main reasons for making items bound to a character.
1) Prevents twinking. For many people they don't see this as a problem. For others they do. Especially when it comes to low level PVP. If you aren't twinked you are screwed. PVE it doesn't make that huge of a difference, but many group will invite the player that has the better gear over the player that doesn't if they are trying to do a very difficult area and they don't know either player. Which makes it more difficult for newer players to find groups on older servers.
2) Prevents item inflation. Without some sort of mechanism to remove items/gold from the game, everything gets inflated to the point that new players on a server had no hope of obtaining anything of better gear unless they find it or some high level dumps some items on them. At least having bound items takes that item out of the game at least. No one likes having item "decay" or destruction, but more people are willing to stomach item binding which at least does the same function as item decay of removing items eventually from use in the game after introduction.
3) Keeping low level crafting viable. Without item decay or item binding, then low level crafting is nothing but a boring money sink. You'll never be able to sell off anything you make. Even getting to max levels of such wouldn't make it viable. Mainly because if you are starting later on a server the "established" max level crafters have made their profit. If they want to move items they can always undercut any new crafter by far.
4) Prevents some exploits. Most exploits in online games in the past have occurred through item duping. By forcing items to be bound to the same character and having vendor sell costs very low then the incentive to dupe items drops dramatically. Not that the incentive to dupe will go away, but it does drop it.
5) Prevents Real Gold Sellers to an extent. Good item drops are worth WAY more in value than the possible money drops by the same monsters. By restricting those drops to bind on pickup, those items are now only of value to someone that picks up the item and uses it. Real Gold Sellers are then no longer as concerned about camping rare spawns or boss mobs or monsters with potentially rare loot over others, thus possibly harming the game play of others wanting to kill that monster. If the boss monsters drop the same amount of gold roughly as the easier trash mobs that are everywhere then there is no incentive for real gold sellers to create bots that camp out the boss monsters which would be more lucrative if the highly valued equipment the boss drops could be sold to other players.
6) As part of level 5, it prevents high level camping. Who here remembers the original days of EQ where level 40+ champs would sit on low level boss spawns and camp them for their item drops to resell? Granite Tomahawk, Shiny Brass Shield, and other items like those? Anyone remember those days where unless you were at or near max level then you had zero chance of being able to kill a rare spawn critter for rare spawn loot. The only way to obtain that loot would be to purchase it from the high level player that was camping that monster instead. Having items Bind on Pickup removes that crap from the game and gives all players a fair chance at obtaining equipment for themselves and being able to experience content they want to themselves.
There are a few more reasons for having BOE and BOP item drops. The ones I listed are the major reasons though.
As for your second question about loot. It's the same stuff but different looks. It's all based on a numerical system for governing base level and stats. Be it PVE drops, PVP won goods, or crafted items. A Lightersaber hilt level 8 is the same for any way you obtain for example.