Heirlooms and levels (but mostly heirlooms) give a sense of acheivement. If they weren't there cRPG would be Native MP with different balance shortcomings.
I think heirlooms and the generation business in general should be reverted back to something more like in pre-upkeep versions, with some major changes. No more wpf carry-over and no more xp bonus. Instead, generations should cost an increasing amount of gold and the minimum level to retire should increase too, making each generation longer than the previous one. That way, heirloomed equipment would be very hard to get and thus very rare, this allowing to make them really special and make the modifiers as powerful as what they are in Native SP without unbalancing the game.