Since I'm also not very fond of the milestones/daily items interaction, I'm interested in this. How do you handle item uses in an encounter?
Its simple. No daily items whatsoever. It all becomes encounter.
This does need some tweeking. Predominantly (rules of thumb)
* Anything that offers healing to a surge value now requires the use of a surge (for instance, dwarven armor is now once per ecounter spend a healing surge as a free action, and our tank LOVES that armor)
* Anything that allows the recovery of a used encounter power (like a battlemasters weapon) requires the use of an action point (giving this a VERY strong tie in with the original proposition of this thread)
* Recovery of channel divinity does not mean the re-use of a prviously used divinity power, just the option to use a different one
There is also a new slot called the "trinket" slot on a character which they can place wonderous items in (i.e. you can only call upon one wonderous item in an encounter...not as many as you carry in your backpack)
and after that, case by case tweaking, and tell your players to NOT have any expectation that an item in a source book is utilizable as written.
Also, up the anti on encounters, cause your player do become more powerful overnight
Players love it because they get to use items all the time (making that drop of an item with a power a real smile time event) and from a GM'ing perspective, its one less thing to keep track of.
I dont do milestones what-so-ever.