Since the game's release, the players of DDO have formulated theories to try and explain the vast mysteriousness that is the DDO loot system. With over 900 raid completions to my name, here is my theory.

Theory - The named loot drop rate depreciates with high pull rates and will recover from depreciation with lower pull rates. Each quest difficulty is treated separately.

What are some of the implications of this theory?
1. If you want the highest named loot drop rate, choose the difficulty that has the lowest pull rate. In other words, pick the difficulty that is run the least often.
2. The bloodstone drop rate will be much lower if a lot of people are constantly ransacking the chest, than if only a few people are occasionally.
3. As different raids and loot runs go in and out of popularity, the drop rates will fluctuate.

(note: pull rate being the number of times a chest is pulled from per time or pulls/time)

--------------------------------------------
Observation #1 - The quality/quantity of loot coming from a chest decreases when opened multiple times within a short period of time.

This observation has a large amount of evidence to support it including in-game text notifying a player when they have reached the state of "ransack."

Observation #2 - The quality/quantity of loot coming from a chest will recover from deprecation over time.

Like observation #1, this one has been well observed.

It is difficult to be any more specific about the first two observations. I will not attempt to determine at what rate the loot depreciates to ransack or appreciates out of ransack as it is not relevant to my theory.

Observation #3 - Some quests have the final chest spawn in different places for the different difficulties.

The two places that I noticed this in particular was the Hound of Xoriat and Vision of Destruction. This one leads me to believe that there does exist some difference between the these chests on different difficulties. Also, for those end chests that spawn in the same spot for each difficulty does not mean that they are the same.

Observation #4 - Raid loot drops more from a raid when it is first released than it does after its been run for many weeks. This is most noticeable on the difficulty that is the most popular.

The evidence for this observation isn't as strong as some of the others and is closely related to the final theory. For example, when a raid first comes out, each completion may produce multiple pieces of raid loot. As strategies are learned and completion rates go up, each completion will produce closer to zero pieces of raid loot.

--------------------------------------------
How does this theory relate to other theories?

There have been attempts to use static observation to determine which difficulty will have the highest drop rate.

For example: running a raid X number of times on normal, hard, and elite, and seeing which one has the highest drop rate. The conclusion being to always run that raid on the difficulty that had the highest drop rate.

The problem I have with these studies is that it is often conducted over a narrow time frame and assumes the drop rate is constant.