That being said, I can totally think of a few ways to get around that. It's like you said, the client doesn't really need to know until the enemy is looted.
[Actually, the one exception that I can think of is that rogues can pickpocket certain loot. And while pinging the server to generate loot once the npc is dead feels like it shouldn't be a major problem, having to ping the server to generate loot while the npc is still alive does make the system architect in me feel a bit more nervous ... at the very least for systems as they were when EQ first came out.]
The reason why they probably did it is because NPCs actually used the items. When the froglok King loaded his two handed sword, he was actually using it. And when he didn't load it, he wasn't.