The "Loot Threshold" is similar to other MMOs like WoW. If you're in a group, you can set the loot options for which type of loot. Green is uncommon, blue is rare, purple is epic, orange is legendary. If you're in a group and something of that quality drops then I think the game makes everyone roll for it.
Though since I haven't had that situation so far I can't tell you for sure.
With regards to the martial arts attacks I think you have to go bare-handed to use them. You can have one weapon equipped but not two.