Glad to hear you like it. No matter how much its-a-great-job-man reports I get I still can't help but feel an increase of inspiration at these moments)
Anyway on to answers
Butcher drops RANDOM stuff. So does Skel.King. This might seem like disadvantage, but it is really not. You can always restart the game and kill the butcher to see how random his drop is) This way you can get many useful items. Ofcourse, the best items will drop ONLY in Hell, Abyss and Crypts, but The Butcher can also "give" you many christmas presents, too.
Item requirements are balanced quite nice IMO. Any class, at any age, with any sort of development strategy will always find what to wear/swing. It's just that there are so much more items than in regular Diablo/Hellfire that I don't even think that anyone ever will find all the types of them. At the beginning, and especially at early levels of Horror mode you'll get low level items. But the closer you will be to Doom mode deep levels the more variety in items you will have. Items can be dropped quite early, but they might give you hints on which stats to invest in when leveling up.
Butcher's cleaver doesn't exist anymore. Let's get real: it wouldn't help you. I mean come on, it's only 4-24 damage, and +10 to STR. That's even worse that THE weakest of unique axes here. Arkaine's valor is gone too. AC25, -3 DFE, faster hit recovery. Not the brightest tool in the box. It might be good in Diablo. But here... you wouldn't wanna wear it when facing some Fear Hunter pack trust me)))
As to the remaining quests:
DLVL 1: The Butcher [random drop]
DLVL 3: Skeleton King [random]
DLVL 2: Poisoned Water [unique helm, Winged Helmet, req.57DEX, nice thing to wear]
DLVL 5: Magic Rock [unique axe, empyrean axe]
DLVL 6: Gharbad [random magic item + unique BLUNT]
DLVL 7: Halls of the Blind [unique amulet, amulet of solstice]
DLVL 8: Zhar the Mad [random book]
DLVL 9: Anvil of Fury [unique axe, Spectral Slasher]
DLVL 13: Warlord [usual stuff + 2 more weapon racks]
That's it. I was trying to implement Arkaine's Valor quest again, but it wasn't worth it anyway. A lot of space from dialogue connected to that quest were used for various purposes (like increasing item and boss types, for instance). Ogden's sign, Lachdanan's curse and Black mushroom, these quests will never be ressurected.
There IS a stasher in the town. Take a look at that old dame Gillian. She can keep your staff, free of charge. In one of her gossips she can even tell you the story how she became a stasher
Make sure you start the game with 'RUN_HELL.EXE' to be able to use stash plugin.