People want a better community? Then start making one.
Paradoxically, the "healthier" an MMO's population, the harder it is to make a better community. The larger the population and the more churn it undergoes, the less relevant individual punitive measures become. If the population is sufficiently large and dynamic, then no matter what you
do with regards to a particular looter today
, that looter will be able to find another group of people to take advantage of tomorrow (or even in the next few minutes). Likewise, your actions against the looter you're teamed with now won't mean jack with regards to the next looter you encounter.
In short, you won't stem the tide. You won't teach today's looter a lesson, and you won't forestall the next looter's attempts to loot. This statement isn't condoning the actions of looters, nor is it an attempt to discourage anyone from doing what they feel is right. It's simply an observation about player behavior in MMOs (supplemented by elementary game theory).
The fact is, the Need/Greed/Pass system materially rewards people for rolling Need on everything, and the nature and structure of the typical MMO population can impose no meaningful disincentive for doing so. Build community all you want - just recognize that the looters aren't going away, unless the game's population gets problematically small. Forewarned is forearmed...