I don't believe that grids are any fun for an RPG, it was annoying is fuck in Diablo, in NWN in every game I can think of, as usually this level of "realism" is not needed.
Grid-based inventories can be fun if implemented correctly.
Deus Ex did it best, because you couldn't carry every weapon for each cathegory and was forced to specialize. Most powerful heavy weapons were huge, and even if you ignore them and focus on conventional firearms, you're still going to have trouble with having a sniper rifle, an assault rifle and a shotgun all at the same time. There is some room for improvement though - consumable stacking is way to generous, and ammunition doesn't take space at all, which makes it too easy to hoard ammo for brute force.
Arcanum uses grid-based size-limited inventory too, but it also limits your carrying capacity by weight (which is defined by your character's attributes). Unlike DE, Arcanum doesn't stack consumables into one slot. Unfortunately, it suffers from other issues like unlimited ammo (which is universal between all firearms) / batteries / fuel capacity.
Diablo 1-2 - yeah, due to its gameplay loop (find a piece of equipment, use it for some time, drop it in favor of a cooler piece of equipment, rince and repeat) it doesn't really matter whether the item is big or small, items don't take space while equipped anyway. Blizzard understood that when they made every weapon and armor take equal space in D3, effectively limiting player's inventory by amount instead of size.
For the most part grid-based inventories limited by size may serve two functions - gameplay or immersion. If it doesn't work gameplay-wise and your game isn't focused on delivering a realistic and immersive experience (it should fit KCD way more than its current oblivion inventory), then the inventory shouldn't be grid-based and limited by size. Another reason not to use this type of inventory is the abundance of trash items like notes, keys, crafting components, useless cuttlery, etc - basically, TES.
