There has been talk of a more comprehensive anti-abuse system like a password lock or an item count/quality check behind the scenes.
On the balancing front, items need a few modifications. The auto-spell-cast-on-attack mechanic can still be abused with high Dex/attack-speed heroes and more importantly, items can be brought into battle for free. Even handicapping doesn't work because although it gives worse-equipped players more ASP, that bonus is finite whereas the bonus provided by items keeps on increasing (as in, units will die but the hero will regenerate and keep regaining the value derived from items). High ASP derived from handicapping also promotes rush strategies for worse-equipped heroes, which is another bad side-effect. Items definitely need to have some kind of cost to be brought in. I am currently unsure as to what this cost or limitation may entail.