The thing here is that the cr guidelines assume that your PC is appropriately equipped for his wealth guidelines.
Exactly. And depending on the encounters chosen at each level, the treasure guidelines may or may not add up to the guideline! That's exactly why I am quick to do a level-end wealth analysis. If the party blows their money on bad equipment, that's fine. But I at least want them to have the funds to spend according to the guidelines.
Thus, they should not only get eq, but also ensure that the eq they have suits their character build.
And this plays more to enjoyment of them game than mechanics, although it certainly can have mechanical reasons. Players often spend hours agonizing over howto make their character. Nothing smacks a player in the face like not being able to get the equipment that makes your character complete. Is it necessary? No. But is it often the sweet icing on the cake? Absolutely!
Nor is dnd supposed to be about haggling.
Seriously! It's been my longstanding opinion that haggling around the table is counter to what roleplayingis all about. Why do so many people use CHA as their dump stat? Because DMs let their players substitute real ability for CHA every time! Who needs CHA if a DM is going to let them RP their way out of CHA? Nothing says meta-roleplaying like a CHA 8 fighter talking a merchant down on the price of a sword!
Think about it. When a charcter around the table makes a Jump check, do we go find a long jump pit and let the player see what they can do? When a character wants to make a Hide check do we let the player find a dark corner and see what they can do in real life? Why then do we think haggling should be RPing? Haggling is one of the main reasons we have skills in 3.5. Do a roll, see the result, and give the price. If you want to RP the interaction, cool. But the roll (based on thecharacter's CHA at some point) determines theresult.
And remember - merchants should have good ranks in whatever skill you're using for their haggling skill (Diplomacy, CHA check, etc). Merchants who have poor ranks in whatever skill haggling uses quickly will be out of business. For the record, in my game players who want to haggle who lose the opposed roll by a significant amount (like 9 or 10 or more) find the price goes up because they offended the merchant so badly!
I've played a dirt poor fighter that was happy to have his composite long bow at 7th level.
Yeah. And so long as they want a bow for their character design that's cool. And ... it depends on the purpose for the game. If I'm gaming just to have fun with my DM or players and I'm not in competition with them ... this would just irritate me. I mean, it's a game. It isn't like it's real money, or real items, or anything. So long as the players are expecting the kind of game where you get what you get and like it, then its cool. But not all players will. Some players enjoy combining the feeling of a well designed character with the feeling of items that blend into their character design.
I also don't allow the magic item Walmart IMC.
You say this like it's a bad thing!

I love the Magic-mart, and so do my players. I can understand how it stretches the suspension of disbelief for some people - and if so then don't use it in the game. There's nothing wrong with not using Magic-marts.
However, in a game where characters can be raised to new life, where staffs can contain and hold special powers, where monks can move an outrageous number of feet in a 6 second round, etc ... I think that Magic-marts are fine. It eliminates the player/DM tension (if any exists). It allows characters to design exactly the character they want. There's nothing wrong with not using them, butthere's nothing inherently wrong with using them, either.
And the only players that take half-value for an item are a) in a rush to dump it ASAP; and b) aren't willing to haggle.
As for a) - Runestar has a really good post above as to why selling equipment is worthwhile.
As for b) - I don't agree with the haggling position. (But, we're allowed to disagree. Your game doesn't haveto be my game so long as there is room for both games within D&D)
As long as your players are happy with the rewards, and PC's aren't being overpowered by level-appropriate challenges, things are likely to be working out OK.
I think this is a great summary. If the game is working and the players are happy ... then its all cool! But in the OP, it sounds like there is a little possibility of the natives being restless. The nice answer is that it is an easy fix. Make sure the party is around the DMG guideline and the players will behappy. How you get them to the guideline is up to you the DM!