As a DM of a 4E game myself, I understand where your DM is coming from. That said, I wouldn't go so far.
In my campaign, I hand out magic items based on what I think the players would like.I have a cavalier that decided to use a spear and shield, so I put a vanguard spear on a minor boss. We have a pacifist cleric who likes staves, so I put in healer's chain and a staff of tongues, which he seems to enjoy.
I've started putting in magic items now that have an enchantment that the players might want, but they're on the wrong weapon type, so they can transfer the enchantment over. Then, I adjust their gold gain to compensate.
If they want to sell a magic item, they need to find a merchant who has that kind of money available, which is not going to happen in your small villages and smaller towns. They're about to head to the imperial capital city, though, where there exists a fairly sizable grey market for magic items, so they'll be able to take care of some business while they're there.
I have found one problem with 4E, though (well, one in particular; there are others), and that is that it's a little weird giving out so much money, because it would be heavy and take up a lot of space. I took care of this problem once by giving them a free Bag of Holding filled with their reward. Now they have a community purse where they don't really have to worry about weight and space.
As regards mundane items, I took a kind of Shadowrun approach to that. Since 4E math is based around items only and not roleplaying costs, I disassociated those two things. When the group goes to an inn, the rooms are free. When they order food, the food is free. Their "lifestyle" takes care of it. That is, of course, unless they want to splurge. Want to get that really expensive vintage of elven wine? Pay for it. Want to special order a roast boar for dinner? Pay for it. Want the really expensive noble suite in the capital city's inn? Oh, you're going to pay a lot for it. But for porridge, an ale and access to the common room? You can have it free. It's just not worth tracking that expenditure of silver and copper when you're starting to get platinum coins on a regular basis.