Actually, I think that was only sometimes the case. Peasants were only levied in cases of emergency, and when you needed sheer numbers. Usually army leaders preferred smaller, professional armies. They might be of the same strength like a giant peasant army, but they have vast advantages over peasants. The smaller number means you need less supplies, and that you can command them better. The fact that you expect less losses and their professionality makes those small armies much more reliable.
(The less losses thing is something I learned by reading about WWII tactics. The leaders of the allies, specially Russians and Americans, focused on masses to fight the Germans, that's why often their gear and training was inferior to that of the Germans - but they forgot about morale, because you don't like to fight, even if you know that you're gonna win, when your chances for survival are like 40%.)
And finally peasants are meant to grow crops and stuff, so you don't want them to die in battles, you want them to keep you up.
Concerning the equipment: first of all there is a long discussion about leather armour. Many people believe leather armour was never used in Europe, since not a single armour had been found.
And then there is the question about the average gear. I think those poor guys who only had their linen shirt as armour were rather the exception. Aketons were rather cheap but effective, and the later the middle ages, the more common chainmail brigandines were. Yes, of course an armour is expensive, but so are cars, computers, touch phones, touch pads and so on, and yet people tend to own them, and I see every bum having a touch phone. Of course a whole fighting equipment is far more expensive than a cell phone, it's probably more around the value of a car, but still. People buy used and old cars. And an army needs to win only a single battle, and the survivors can most likely equip themselves with rather good stuff. Those English longbowmen regularly came back from France with Milanese helmets and decorated swords.
Generally I think a good part of most armies was rather professional and reasonably equipped. Especially between the high and late middle ages, for example during the Hundred Years Wars, War of Roses, etc., you barely saw poorly equipped peasants on the depictions of those battles. You had infantry which was equipped with chainmail and partial plate and you had a lot of professional men at arms and fighters who made a living from war.