Well, I think the underlying reason why single-loot PK and loot-all PK doesn't work is because of game theory. I'll try to list what would happen should both players be rational.
*I am taking full-loot PK to mean that your corpse can be fully looted, and single-loot to mean that only one item can be taken from your corpse
First scenario. Two people wish to PK each other, which kind of PK should they choose?
Player A thinks: Now, I should go single loot PK because if I lose, only one item will be looted from my corpse. If player B is full-loot PK, then I get more items, and yay me for going single loot PK.
Player B thinks: Now, I should go single loot PK because if I lose, only one item will be looted from my corpse. If player A is full-loot PK, then I get more items, and yay me for going single loot PK.
Result. Both will go single-loot PK.
Another scenario.
Player A is full-loot PK, and Player B is one-item PK.
Player B decides to PK Player A, thinking that if he loses, it's just one item gone. Player A, on seeing player B attacking him, thinks "Damn. If I lose, I lose all my items, and even if I PK player B back, I have to PK him many many many times and win to get my items back. Player A recalls, and Player B is left to find other one-item PKers to PK with.
Yet another scenario.
Non rational players that are full-loot PK, after getting PKed by those who went one-item PK, go and post on the forum to ask imms for help. Imms then decide that full-loot PKers can only PK full-loot PKers, and one-item PKers can only PK one-item PKers.
One last scenario.
Because of this ruling, only the experienced players that want some competition go full-loot PK, and the rest go one-item PK. Because of this division, very few people get the opportunity to PK each other, being in different camps, and the overall PK skill doesn't increase, because the better people to practice with are full-loot PK, which the inexperienced PKers don't want to PK with, because of risk.
Well...it *could* happen..
*This is also why I would like autoloot not to work with player corpses. It has to be a conscious choice if you want to 'fully loot' a player, or just take an item from his/her corpse, or take several. Would also be easier to diagnose a player's overall PK character. Eg, if that player repeatedly loots consciously, that shows something. If he loots one item, that shows something too. But if it was automated, we don't get to see his true character.
**Besides, melt-on-drop eq are terrible for autoloot. I tend to drop these instead of giving them to people, so I can understand people getting peeved when that happens.