My rules:

1. Looting something because it's much better than what you're wearing is almost never wrong. Even if you gang someone.

2. Destroying gear is almost always wrong, unless the vanquished has been a verifiable douche to you in the past. And I do mean verifiable. Something like, "Dude killed me on eastern road, and when I got back to my corpse it was empty. Ergo he full looted me," does not count.

3. Looting something you can't personally use and have no reasonable expectation of trading is "usually" wrong.

Personally I try to avoid looting stuff in order to give it to other people, even my allies. My rationale being, "If they want it, they can kill this guy and take it. Otherwise they probably don't deserve it." Exceptions would be unique items like strange bracers. If I'm a muter and punk some guy wearing strange bracers, I *might* take them and giving them to a melee-class ally of mine. It depends on how much respect I have for the person I just killed. If I like them, despite them being my enemy, maybe I leave everything.

Occasionally I will even refrain from taking stuff that is marginally better than what I have, when I know that the victim can't use the gear I would be replacing. Or when I know that a given piece of gear is "much" more useful to the victim than it would be to me. Example: As Sulye I returned humansunder to some fort sword spec because it was a heck of a lot more useful to him than it would be to me.