This same factor is really exacerbated since you can easily gang up and kill opposing factions' recruitable heros that are stuck in place by themselves (and haven't been leveling up) and take their equipment!
I think that as a general statement it is too easy to get very strong weapons, armor, etc. overall. I typically end up with WAY more high-caliber weapons than I have champions, and generally more helmets, cuirasses, gloves, etc. as well. I have never once had to buy anything from the shop to outfit my champions - I have much better stuff I have gotten from battles or quests. As others have mentioned, I think the "easy" access to highly powered weapons and armor is the biggest problem with champions becoming overpowered early on and eliminating the need to build a "regular" army (even more of a factor than the XP/leveling speed, which is being addressed).
I think there should be a sharp decline in getting this stuff as "loot", however it happens. While I think the ability to get a "special" sword or whatever periodically makes the game more random and enjoyable, I think the spamming of these things should be DRAMATICALLY reduced. One way I can think of to do this is change the type of loot received from clearing monster lairs, what you get when you beat champions, and what you get from quests so most often don't get weapon-related items...such as:
- from bandit/butcher/wilding camps get only gold. These are usually early game "monsters" and get beat quickly when gold matters (to recruit heros/build armies) and before gold becomes plentiful, so this would be worthwhile still and seems to fit the "bandit" lore
- spiders...as is/get spidery stuff can turn into gold...same rational as above. Same as getting pelts from wolves...like it. Add bear pelts for bears..another way of giving money, but with more of a flavor to it
- trolls...get metal (stuff they have taken from people and fouled/ruined, so unusable as is but can be melted down and reused)
- elementals...get spells (low level and/or specialized/different from what you can get from level ups) related to the elemental (fire, water, etc). Makes magic even more integral to game vs. buffing melee champs
- sand golems, obsidian golems, etc......get materials that automatically get apllied to next thing(s) in production queue of biggest city (e.g. get them produced immediately)
- naja and other strange things.....I'd go with teh same things as Elementals..some unique spell or trait learned that links to uniqueness of creature
probably forgetting some, but that's the idea
- champions from other factions. For recruitable champion aligned to other factions, I would think perhaps they should not HAVE any weapons, armor, etc. Just good stats. That way if you recruit champions you need to give them some of your excess loot to equip them (cleaning out the overage) and/or have to go to the shop to equip them, making that part of game relevant. On an unrelated note, I would think it may be "better" to have all champions recruitable by all sides...just the ones that are more-Empire like would be much cheaper for an Empire player to recruit than for a Kingdom player and vice versa. That would remove the "problem" mentioned elsewhere of the strangeness of walking up and having to kill random people just standing there; would add diversity to your army from game to game and enhance replayability; while maintining the sense that champions are more likely to go with some players than others. As an additional unrelated point (straying a lot now - will get back to it soon), making the cost of the champions increase/decrease based upon the prestige of the player attempting to recruit also seems to make sense as a dynamic for the same reason. In any event, I agree that players should not get equipment from recruitable champions (too easy to kill and get great loot). I personally also agree with the OP that even kllling an oppenent's champion in battle shouldn't get you equipment, but I can see the other viewpoint on this as well - to the victors (in a true battle) go the spoils!
- quests....I think most quests and random special locations should provide "books" rather than weapons (as happens sometimes...just shuold be the overwhelming norm). Books that add to experience, or strength, or some other trait versus melee-type weapons once again makes other factors more central to game than just outfitting champions with the greatest stuff and turning them lose to rampage...at least so early in game.