Players (not characters) loot bodies in-game because they want to buy things with the money. If you want to discourage looting, I'd say the best way in the long run is to remove the temptation altogether, by not having lots of things to buy. (Accumulating gold for its own sake may be the motivation for dragons and Conan, but in my experience, players tend to have a more pragmatic frame of mind.)
Not having lots of things to buy can cause balance problems later on, because the group won't have the resources to tackle the bigger monsters. To get around this, you can try better tailoring the items they find to what they need. Doing this too much strains credibility, though, so be careful.
Magic of Rokugan also contains a description of "nemuranai", which are basically items that become enchanted by being inhabited by magic spirits. Essentially, a heroic character may find that as he becomes stronger, his weapons and armour tend to become stronger as well, as they become infused with his essence. It's a way of ensuring that high-level characters always have the equipment commensurate with their level, without having to grub around for gold.
Enforcing encumbrance rules only works until they get their hands on Heward's haversacks, portable holes and bags of holding. Naturally you can remove these from your game too.