Full loot is not an impossible mechanic to impose properly. In order to make it work though, FFA PvP should be lessened if not removed from the game. Let the player take the risk of taking actions that could lead to them losing their gear rather than making them bait for a bigger fish to steal all of their goodies.

It all depends on your genre, your target audience, and how well it would work with the rest of the game. Full loot can work though, even on a broader scale.

Yeah you're right, there should at least be some sort of regulations so that you can always have a chance to defend yourself without having to rely on others to help you, unless you make the decision to take the risk