Yeah, knowing whether or not a piece of gear will set me on fire or give me an extra shot will make a difference. It's the unknown quantity of gear that bugs me right now.
As it stands improving the gear is probably the best thing to do right now, as much as I like the idea of something from the action side feeding back into the strategic side. I think you'll get more mileage out of the gear, it's already in and just needs some tweaking. Bringing back the Merc coins in this fashion would be a new thing to balance. While with the gear the balance would remain unchanged, but players will have information to make informed decisions with. That's a pretty cool thing and enhances them as bonus power up items. Will any of the gear be keeping the negative effects, and if so will that info be available to the player? There could be some neat risk/reward things that way. Like I take this piece of gear and I get an outrageous bonus to damage output but I only have one heart.
And maybe there could be an achievement for playing through the game without any gear at all.