Theres a few level systems out there that deserve their own classifications. Theres the traditional, basic system, you gain a level and get a few stat points to distribute, which is stupid. Theres absolutely no difference in being level 9 with 99% exp and level 9 with 0% exp. Your strength is like stair-steps, not a fluent line. The system I am going for still has levels, but it is more of a Fable-esque style I guess you could say. You spend your experience on stats, rather than your points from leveling. Your level is nothing more then a general representation of how much experience you have in total, and a rough idea of how strong you may be.
Level requirements for items is the worst idea ever. The first person who did that should be shot, and everyone else afterwards who used it should have at least 3 toes smashed with a hammer. It not only makes no sense, but it is just annoying. "Oh, sorry Jimmy, you have 1000 strength and can smash a dragon's skull with your fist, but you must be level 5 to hold this stick." All it does is emphasize the stair-style character power increase.
Strength to use it makes sense in a way. I can pick up a 150lb bar and carry it around, but no way in hell I can swing that damn thing. The single attempt to do so will probably dislocate both my shoulders, break my foot, and I'm sure that, in some comedic way, I will hit my nuts on something. As for using the items at any time - I can't say how that will affect the game itself, but one important thing about items is that as you notice in games, they just look cooler and cooler as time goes on. No one wants to start with an awesome weapon and move down to a stick they swing at people while running around in their potato sack of mystical powers. Even without a paper-dolling system, cooler items are a great way to intrigue someone to continue playing, and to look forward to.