You will simply go round in circles with this question lol.
My view is with drops off, the "fights" are better. I don't see the ability to drop items contributing to improving the "fight" at all....the fight itself is down to the people you're fighting, not the items they are wearing. The reward of the fighting however, is what changes because you might walk away with a shiney, assuming they don't RT away.
Others view is with drops on, the "fights" apparently become better because of the drop chance. But this could then be argued, a lot of players simply don't turn up to fights with their decent gear, or when leveling/or in decent gear at the time would just opt out of the fight and RT. Then the argument would be, is it really improving your fighting? Or is it creating more situations when fighting doesn't occur because they are in their good gear?
One could even argue that this makes taking mobs/bosses easier because they know people will prefer to teleport away. So then, who really has it in easy mode? :P The ones who want the drops to induce fear to easier mob/boss stealing, or the one who don't want the drops to entice the players they want to fight, to actually fight.
Either way, as has already been said, you aren't going to get a good answer lol. You should have a 3rd option of "Zed's decision" and make sure you stick to it. If you feel drops improves the fighting that goes on, then keep them on, you aren't going to get a reliable answer lol. Fighting will happen regardless, the type of fighting, the players you fight and how much fighting occurs is what will be effected.