It discourages info sharing. The better items to transform, since they're limited, mean I don't want to let my buddy know about it since it reduces my chance of having it.

Thieves can steal them (though some might be flagged hidden on purpose).

They're competitive since they're limited and in high-demand from all mages with the wand skill.

Some are obvious but really hard to get (as in, better gather a group).

They're functional items that people use/wear. Again, competitive.

They have diminishing return (if you don't in fact make them one time use) so the first transform is the best, the subsequent two lesser, before the item finally poofs.

Patterns still form. Some builds will find some items easier to gather. This is observable.

It requires going out and doing something to get an item.

Anyone knew to the mage class has accessible damage reduction.

No more abs at 36 (Cabdru, anyone?). Damage reduction is more likely to scale accordingly to level and knowledge of the player.

It doesn't take making a hero character to explore all possible locations to then make a second character and take advantage of that. It levels the playingfield more than the current system but still has reward and value for deep player knowledge.

No more non-obvious locations or tricky key words (unless you decide to throw a few easter eggs out there by placing a tranformable item there).