I think this could work quite well for groups that still have the DM hand out at least some treasure. Groups who think that the DM should have total control over the distribution of magic items are not likely to like it though.
My group has gone even further than item points and has been playing with a convention that relieves DMs of giving out treasure and magic items since the later years of
3e. Basically, every time you gain a level, you get to re-select your equipment, up to the standard wealth level for a character of your new level. In
4e, this translates to: one magic item of your level+1, one magic item of your level, one magic item of your level-1, and gold equal to the value of one magic item of your level-1 which you can spend on equipment, rituals, or other magic items as you want.
This does have the potential for a total swap-out of equipment once every level, so if you want a more organic accumulation of magic items, you could allow characters to gain a magic item of level+1 at every level increase instead, and magic items that have been effectively "replaced" (a +1 frost sword that has become a +2 frost sword, for example) could be converted into gold at 1/5 value, as normal. As always, you can flavor how your equipment has changed any way you want, e.g. you found it, it was given to you as a reward, you got it enhanced, it enhanced itself, etc.
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