I like the idea of being able to scrap/salvage items for resources you could use to build new items, or repair old ones.
This would be awesome for finally being able to build dragon picks.
As it is I dump most items I find in lava, and/or cram them into a chest in the dungeon and leave them.
OP plays on a PVP server so I'd just recommend to him get rid of some of the extra equipment, shouldn't be too hard to keep a bunch of iron and redstone, 3 slots max, and then a spare set of gear or two shouldn't take up more than 2 tabs total. 2 additional tabs is plenty for adventuring.
I have noticed there are a lot of griefers/thieves on H/M servers so burying a chest somewhere isn't a great solution. On servers with the /home command, however, you can get more creative with your storage solutions.