The defense to this was to carry dozens upon dozens of nested bags, because each bag opening could trip the pick pocket detection.
Also the defense to your home was to literally circle it in tents/buildings creating an empty courtyard that you could only teleport into with a rune you kept safely in your bank box. There were some warping bugs that would allow you into a courtyard though, or even through the front door (circle of visibility bug, as well as floor tile warping).
I mean there absolutely were bad experiences. Griefing drove lots of players away, which is why they implemented Trammel.
You want enough friction to generate interesting interactions, you don't want so much freedom that the worst exploiters start to crowd out every honest player, because then, just like in a rundown lawless neighborhood, you're getting a lesson in the broken window theory and you're only left with the scammers.