Since @Sticky_White_Stuff brought up my topic lemme just link that real fast 
D&D Feat Style System To Replace the Current Ichor Inventory Expansion System
Now for my perspective on the immersive elements. I think they are fine, it is important to realize that every RPG is a journey. We start out weak and grow stronger over the course of the adventure. Currently, we are at the start.
Now for as for the argument that we feel like a tool, allow me to offer a different perspective. The equipment we wield are the tools we are what make them special. When you first fight Warrick there are some corpses remaining of knights in plate armor. In comes the Cerim not wearing any armor and wielding a wooden sword defeating an enemy that tore apart multiple armored knights.
The villagers who upgrade your equipment and such can be seen as retainers who help you on your journey. They are an aid, they are not the ones defeating the enemies we are. If they were to hand their gear to a random guard that guard would still die.
Most of the power is gonna come from whoever is wielding it. Items are but a moderating variable in this; they influence the relative power of the player. If I have a legendary item but suck at the game I still won’t be powerful.
I do think more lore is coming and I look forward to it.