Thought I'd bring this thread back to the front because the GT Live stream just hosted some interesting news.
Damien has said they've changed the system (Apparently very recently), so if I understand correctly it here is how it goes:
Old system: Geralt is level 10. You take on a tremendously tough level 20 Wyvern. You kill it and it drops a level 20 Sword. Geralt cannot use that Sword until he is level 20.
New system: Geralt is level 10. You take on a tremendously tough level 20 Wyvern. You kill it and it drops a Sword, however that Sword will scale down to level 10 (Or very close), while still keeping any additional effects (Like 5 Fire Damage on strike or something like that) the weapon would have had. The weapon will also become "set" at whatever level you pick it up at, so if it scales down to level 10,
it won't continue scaling until level 20, and weapons will not scale UP, only DOWN.
http://www.twitch.tv/gametrailers/v/4042650 Skip to 1:15:20. Hopefully I haven't misunderstood anything that was said.