Actually, I dont see the point in "looting" and "inventory-limitations" at all. We all are RPG-player so I guess everyone knows "you take anything you see, and if your inventory is full you either sell or drop something". So, why is the player still "forced" to manually loot at all ?
There definitely are some reasons for that. For one, to give people who DO LOOT their victims a slight edge over those who don't. I totally approve with that and accept it. But the looting itself doesn't provide that edge per se. It's the crafting that need to be done with the items you looted before.
So a "new" approach could be to automatically loot anything (from corpses, not regarding herbs and so on) since the player has to craft anyway. That way you don't need those "bags" - and yes, they really destroy the feeling you get playing that awesome game.
I also could think of another way regarding "looting". For those of us a little bit deeper into "the witcher" it's clear that specific monsters are used for specific things, therefor it should be clear that those monsters CAN and have to be "HARVESTED". I'm specifically not talking about "looting" because its not that the ingredients are carried in a brown bag by the monster, right ?
So, what I suggest would be some sort of "harvesting"-skill, so the player has to learn about monsters and can only use specific parts from the monster he just killed if he has the knowledge about it. This way the player kind of gets forced into "getting to know the lore" ( which - I admit - also adds some problems for those player who just dont feel like collecting information about monsters is fun. )
Long story short: Looting should not consist of collecting brown bags.
Cheers
Pargulan