I generally think its a good idea, and would like to help i build a similar system called White Rappid a few years agoe when i started on my own MMORPG (only 2D) as i did not have time to make 3D
The general idea was to incorporate a " Do i look scary to you."
I based it on the more fancy your equipment looked the more scared the NPC was of you worked quiet nice, when i paired it with a NPC level system yes, i actually gave the MOB points for beating the human and then becoming a better MOB.
MOB how ever had no idea or concept of what equipment was but DAM did i have some nasty MOBs in the end, but the idea was that this also made the general game more dynamic it made it more interesting as mobs also had a very basic political opinion about races and you, if you killed one they did not care you kill 30% of the race they got angry over 60% they got scared and tried to find some bigger mobs to kill you.
and yes i also based it on some basic nature "Humans like to kill for fun, animals only for food or survival" based on a properbility on you looking scary and it knowing that you killed its kin.
Short to say i would like to work with mobs and daoc as well trying to make them more interesting as they can also wander and get better.
Get back to me