But in response to my players' needs and my own desire to simplify the gaming experience at our table (though it may seem like I like a bit of crunchiness on occasion: using comeliness for example) I have been searching for an alternative which requires little more than basic arithmetic while still making encumbrance an important player choice.
A great blog which I have been following is Brendan's Untimately. In this great post he lays out a system for calculating encumbrance and applying penalties which requires nothing more than simple addition and subtraction.
First, divide all items a character carries into two lists: encumbering and non-encumbering items. Encumbering items include any individual item or group of similar items which could slow a character down if carried. Let's define anything that a character would notice being removed from his backpack as being encumbering. A dagger seems to be a reasonable unit of measure upon which we can base our rule of thumb... or dagger. It seems reasonable to me that anything bigger or heavier than a dagger would be noticeable when removed from someone's rucksack; these would be encumbering items. Conversely, anything similar or smaller and lighter than a dagger would be non-encumbering. What do we do about carrying larger amounts of similar items? A quiver of 24 crossbow bolts would only be one encumbering item for accounting purposes, not 24. Additionally, how should we account for containers, like the one in which the bolts are carried (or backpacks, scroll cases etc.)? Basically, they are always counted as non-encumbering items. Additionally, what do we do about coins? A character should not be able to carry around 10,000 gp and have it only be as "heavy" (in encumbrance terms) as a bastard sword. So, for every full 1,000 coins that a character carries his encumbrance is increased by a value of one (e.g. 2,350 gp increases encumbrance by two; 990 gp does not increase encumbrance at all). Magic items are usually encumbering items. Armor weighs in a bit differently: heavy armor has an encumbrance value of three, medium armor is valued at two, and light is just weighted at one.
The second step is to simply total the amount of encumbering items that a character is carrying. If this number, the character's encumbrance rating or value, is greater than the character's strength, the character is over-encumbered; take the difference. The difference is the character's actual encumbrance modifier.
The encumbrance modifier is the penalty applied to checks and rolls which are effected by being over-encumbered: all physical checks: attacks, saves, skill checks, initiative checks (this penalty is subtracted from a character's other initiative modifiers), etc.