I was worried about this 

In short: Encumbrance system was not bad, it had a major flaw because it only had two points in which it had any effect (40% and 80%). Instead of removing the system it would had been much better to fix it making it much more gradual.

Many powerful weapons are also useless since it is so difficult to now achieve the level required.

Definately. Without encumrance, why pick stuff other than the best available?

With encumbrance, there was the added mechanic of picking the best available based on condition of max weight. You had to choose where to make the cuts and savings.

Phew....glad I'm still playing FE.

Not sure I see the problem with its removal.  As I understood it, basically encumbrance was just cut off points for effecting initiative.  Items that raised encumbrance, were effectively just "plus" initiative items . Now each armor piece directly effects initiative.  

Items that would have let you carry more, now raise initiative (and the few that got "broke" like strength/muscle I assume will get fixed soon enough).

some of the low level treasure finds have become useless junk

unlike before?  From time immemorial, this game has always had a lot of useless junk.

Equipping your heroes with the best equipment available?  We don't want the player to do that!  Next you'll be suggesting that they use the most powerful spells and make the most powerful units they can.

Obviously, they'll need to balance the items again.  But Stardock does that all the time.  In fact, if they're listening on these forums, they're already rebalancing all the weapons to do less damage.  So what?

Encumbrance was a stupid system that wasn't fun and added no depth.  Good riddance!

You forget about the initiative penalties they added to heavier armor (since it's no longer dervrived from what % of your ecumbrance bar is filled). In fact, in the curent (.80) build, some of the most succesful units I've made have completly eschewed anything heavier than leather, to keep thier initiative high so they can run in and slaughter front-line guys before they have a chance to move and take advantage of swarm, something that would be very difficult if they were wearing some form of chain or plate.

I just want to stop collecting 5 wooden shields in a row. That's all I ask!

I liked the encumberance system.  Not sure why it was necessary to nix it.

I had a situation in on of my recent games where I found that super heavy badass double/quad bladed axe thingie that was super heavy (100 lbs or something like that).  I chose to give it to Bacco, but it was too heavy even for him.  So I ended up picking a strength trait to boost his carrying capacity so he could actually use it.  I also gave him the Backpack of Holding to help as well.  Normally I wouldn't have bothered with the trait, but thanks to encumberance rules I had need of said trait.

Now the Backpack of Holding (or whatever it is called) only gives a +1 to initiative.  Lame.

These are the kind of decisions that make the game more interesting.  By taking things like this out, the game loses some of it's flavor.

What is curious to me is that they obviously went to a lot of trouble to take out this system, including developing new skill trees, changing graphics, and re-balancing numerous items and weapons. I just don't understand, with the other issues in the game currently, why this was focused on. I'd be curious to hear from Derek about what internally caused this need, because it sure didn't seem to come from the forums.

Because the different weapons and armors SHOULD have different penalties (initiative, dodge, ...) and SHOULD require proficiency traits that can be instantly selected, because they are in the general tree.

The problem is that previously each unit could have a different encumbrance maximum. So the effect of a heavy item was not the same in a strong unit than in a weak unit. Now all units get affected the same, all get the same initiative modifier regardless if they are a wizard or a warrior. So why bother going to the gym?

You are not supposed to wear the rusty plate, you are supposed to recycle it! It's a clever educative element, and a reason why Stardock is eligible for EU subsidies for spreading the environment awareness agenda!