Lately I've been working on the armor/equipment/weapon system. I've implemented Stances which are sets of animations created for a specific weapon type. So far, I have animations for 1-hand weapons, 2-hand weapons and staff. I've also been experimenting with applying particle effects to bones, as with the fiery sword in the above screenshot. So far it's been pretty straight forward implementing this stuff.
The functionality is there to do other pieces of equipment; however, I haven't modeled any kind of armor or cloth pieces yet so really nothing shows. The other equipment slots are implemented differently from the weapon, in that the models are created as AnimatedModels that share the base skeleton, whereas the weapon is a static model parented to the weapon bone. As you can see from the above shot, you can get creative with the node descriptor passed to the weapon switcher. In this case, the descriptor specifies a static model for the staff, a light to emulate the staff tip glowing, and a simple particle effect around the staff head to make it all mystical and whatnot.