A thought on the discard all option: What if there was a check box in options where you could select to "replace" loot - similar to how, when you're sailing, the cargo keeps replacing itself with higher level cargo as you go, what if it would then automatically destroy the lowest gold-value item in your weapons inventory and replace it with the higher value item you just looted, and if, in the case you get something to drop that's lower value than everything in your inventory, it's destroyed right away? But just for page one of inventory. Anything in page 2 is considered exempt, and always kept, regardless of value.
I feel like that's a good neutral ground. Personally I'd still like to get stuff to sell (i'm not at gold cap nor have I ever been there) but i'd like something like this since thats basically what i find myself doing manually as I loot. This way it would be automatically handled.