I'm currently playing on Hell difficulty act 3, but the loot is just utterly rubbish. Every single weapon thats dropped so far is only around 120 dps. Butcher dropped a rare level 53 bow with a dps of 110? I almost cried when I identified it.
Every single weapon I've used I've had to get from the AH, all the items that drop for me are just rubbish. If they hadn't implemented an AH I would have been stuck with one of the above mentioned weapons.
When does it get better? Guessing it's inferno mode before I get actual usable items.
I've had this problem as well, for a long time i get utter shit loot and then i get a lucky streak and pick up some awesome stuff. Just got 2 legendaries off white mobs in 1 hour. Thats random loot for, not much you can do about it. That's just how diablo is. Its also better if you can find some fiends to level with and share loot.
I know in D2 more people meant harder mobs, Harder mobs meant better loot...probably the same system here, Inferno mode + a full party will probably yield the best probability for good drops (Not to say you can't get an amazing item by yourself...it'll just be harder)
I mean the weapons exist if you buy them off of the AH, which just means your luck sucks. And if you are that far in to Hell than you could probably start farming for gear without it being a waste. I mean you'll need good stuff in Inferno anyway.