I think one reason 4e is well-suited to it is because magic items in 4e are - by default - not really rewards at all (despite the misleading heading in the DMG). The "parcel" system means that treasure is just another element of PC build, that is more granular and on a slightly different track from the stuff described in the PHB.
This makes it easy to have treasures that are special in one way or another to a particular character. In my main 4e game, one of the PCs has been collecting the Rod of Seven Parts from 2nd level. Another PC at one stage had a dragon's tooth made into a Wyrmtooth dagger'; and the same PC found a cache of items that had belonged to an ancient member of the drow cult that he belongs to ("The Order of the Bat", a group of Corellon-worshipping drow dedicated to ending the sundering of the elves).
In a reward-based system you can't assume the magic items will be found; nor by whom. But in a "parcel"-based system both those assumptions can be made without any problems.
Sure. I understand the reasons for doing this, it does give the GM a 'channel' through which he and the players can access a more free-form build subsystem. It has a few other characteristics as well. There's 'planned obsolescence' where if you give out a 'big 3' item and its not a great idea at least it will fade to irrelevance over time (unless you use inherent bonuses, something I don't actually do, though it has its plus side). It can act as a signaling system for players to indicate the direction they would like things to go in. It can provide the GM with an easy way to give the players fairly meaningful choices (go for the holy avenger or go for the dragon slayer).
I think it has a severe downside as well though. By replacing the risk/reward ratio system of older D&D the game has lost its aspect of 'taking a gamble'. Even if you run a game as a sandbox, the players know what treasure they'll get. You don't have that sort of option anymore to say "well, you COULD go down the stairs to level 2, the treasures are bigger..." so to speak.
This is one reason why minor boons (which includes most ordinary treasure) are unregulated in HoML. Items are strictly inverse regulated, you get an item (major boon) you go up a level, there's tautologically one per level, but not things like 'gold pieces', or consumables. So an item will first of all always be acquired through some narrative activity (I guess the GM could give it away, but that would be odd as its tantamount to just giving away a level). However, since I made the categorization of things much less strict there is a lot more leeway in terms of how this sort of thing comes about in the story. Things CAN become rewards again, and items are not 'levelized' either, so there's no notion that you 'only get things that are so good at level 1', which was another aspect that killed the risk-taking element of the game.
Admittedly, gambling with your character is not always very compatible with developing the character and story; it can be though. I mean, many heroes take a big risk, its a part of the job, and its good if there's a big material reward there, something to signify that.
4e's artifacts definitely serve that purpose, but sometimes they're not fine-grained enough, or don't really fit with the story exactly. I was a little unhappy with the lack of easy ways to change that approach with 4e, its very set on its parcel idea. Because it crosses over into the player's side of the table in a very explicit way its hard for GMs to mess with it.
I see what you mean wrt to sentient weapons
