Personally I dont think adding a new layer of complexity with fully degradable items is a good choice for an rpg, even a heavy combat oriented one.
Having items completely degrade until they are unrepairable/disappear sucks imho.
There are plenty of other things you can do to create money sinks or balance the economy, besides in the case of dungeon crawling for example is forcing the player back to the nearest trader/smith very often a good design decision? Does it add depth and challenge or just extra work?
It all depends on the specific game, plus you're making very generalist assumptions. Forcing the player revisit the repairmen
very often sure doesn't sound good, but does this how it has to be with all games, or even how it has always been?
I think, regardless of how often the game sends you to Mr. Repairman, there should be other factors to create a conflict of interest and challenge for maintaining and repairing your equipment. You must be balancing up something else by keeping your equipment at moderate condition.
Take my model suggestion and put it in a game where time is almost always of essence. Everything you do when you're travelling means it takes you longer to reach where you're going. If you're short on time, you'll need to balance how often and how well you eat, rest, how safe you travel and whether you'll have time left to do anything else like maintaining your equipment when you're camping. Maybe some of your equipment are in so bad a condition, you need to make a trip to a town with a Mr. Repairman but since you also need to be fast because you're short on time, taking that route might be risky plus can you trust to get your equipment back when come back for it later? (in Daggerfall, you can't. Repairs have deadlines. Miss it by a day or two and your repaired items go *poof*); or maybe you need to travel hidden and keep a low profile, and visiting the local Mr. Repairmen might not be the best way of maintaining that. It's an ever-present conflict and challenge. You must prioritize and plan ahead or you're screwed.
So as long as there are other factors that can take precedence to maintenance/repairing and vice versa, I think it's all good. With the exception of Daggerfall ( I've had enough "emergent" challenges due to my own negligence in Daggerfall to feel that it was always natural. Plus, as I said, the game had a very reasonable threshold for items breaking down ), I've always felt that items degrading just because they can, is a chore.
I think its a bad design decision, this is why I also tend to support unlimited or very large inventory space and encumbrance only being tied to equipment worn.
Because it's bad to send the player back to repairmen very often, you want to have unlimited/very large inventories. Do items degrade and break in your model? Judging by what you said, I guess not, but then what's the point of having the ability to pick up and store every piece of anything you can ever find? I'm not making the connection.
edit: fixed some wording.