First off- Loot is useless if the player would not reasonably use it. It must be useful, even if it's useful in only niche circumstances. The exception to this is 'filler' loot which fills a chest and is obviously just there to make the chest layout nicer, e.g. bones arranged to look like a skeleton, or string scattered about in a spider dungeon.
Second- Loot should ideally be easy to spot. So chests shouldn't be hidden under trees or at y256. At a minute level, the chest layout should ideally be structured in such a way that the player will know where to look, e.g. Weapons and armour in the top left and food in the top right... Players should be able to glance inside, take what they need, then leap back into the action. Almost every one of the loot chests in Savage Realm are structured in a specific style, inspired by Amlup's logical design. It works for me, and made loot placement that much easier for me.
No, I don't think so. I think loot is more there to reward the player for what they've accomplished. This can be a reward for finding a secret, beating a dungeon, or just exploring the other room that had no objective in it. If you look at it that way, loot doesn't have to be useful all the time. In fact, it doese't have to have any use at all, if it's cool in itself. Giving the player something fun can be good too, or something that is just cool too look add.
With this, loot also regulates the tools the player has at their disposal. Most of your tools come from loot, and so you can use loot to give the player access to different strategies of clearing areas. Not all loot are supplies. It can be a stack of tnt that's only good for that specific area, or a water bucket, a key to a door somewhere, or a utility item. Setting every chest up the same way makes loot just one big "supply" number that the mapmaker regulates.
@redstone why bother naming stuff between intersections? It's not 100% necessary to even increase the quality of the loot, since if you increase mob quality as well that doese't really do much. But if you want better loot, you could just make it better without giving it another name? Numbers are numbers, gameplay is gameplay. Those are 2 completely different things.