i didn’t read everything but no , it doesn’t work like that.
it would be way overkill compared to FFA considering P 8 is about monster density
and even without that , P1 loot is more than most people get in FFA.
usually instanced/personal loot is simply :
if baal loot 5 items in total in FFA
baal will still drop 5 items in total in ploot (but 5 players will receive 1 item each and the other get nothing)
your way of seeing it would increase the overall amount of loot , making it not something optional at all since it would be universally better than FFA if everyone would get as much loot as if they were solo , by a HUGE margin , it would really create a lot more items on the market which would be pretty bad for the economy.
and something optional should never gives more than another option , otherwise it’s not an option.