I often find mechanics that only exist to waste time incredibly annoying. In the case of loot, a limited inventory is kind of that. You could absolutely just portal/teleport to town, sell your stuff, and then get back to playing. There's no challenge involved, EXCEPT that it wastes your real-world time.

I liked the pets in Torchlight for this reason. You could send them off to sell loot, while you kept playing the part of the game that's actually fun.

One exception is something like Resident Evil, where the choice is relevant to the gameplay directly. But even then, I would've preferred limits on individual elements (Only X weapons, only X healing items, etc.) and having extras automatically stored.