[Kereth]

is a heavily modified LP MUD, like the one you described. It's got a rich supply of newbie areas spread out across six different worlds, and it loads with free newbie equipment, albeit about as worthless as you described. Several guilds have spells or skills to create or summon more powerful weapons or equipment, however, and there are also many guilds which rely more on spells or, in the case of the monk guild, bare handed combat, and aren't as reliant on equipment, which can be quite helpful to the starting player.

Hope that helps!
-Kereth Midknight