I would rather prefer some side quests which requires absurd amount of cash as solution to excess money (so hoarding money would make sense) or maybe ordering custom gear from merchants? Maybe even some high level robbers who will follow you around if you start to make huge amount of money from the loot and carrying cash with you... forcing you to either hand over most of your money or get killed (or stash your money and loot somewhere and go back for it when needed).
Instead of merchants refusing to take same type of loot the price should drastically drop for each extra item making it pointless to sell it but if you want to get rid off it quickly for some reason... basics of market economy.
Maybe option of buying store from some merchant in financial trouble (tons of extra cash gone) and then using it to sell loot you gather (via merchant who now works for you) but that would naturally be a slow process and you get small amount of money from time to time (what is left after paying salaries to merchant, store guard(s), loot quality and quantity you offer = more quality loot more money...) but in total more then selling directly to merchants.
This way you get yourself nice storage facility in which you can set which items you want to sell (aka selling shelves which you stock with your loot and won't get shot by guard if you take something back
) and which items you want to buy (buying shelves on which you place money you want to spend and single piece of items you want to get i.e. 12,7mm round and in few days money is gone and some rounds "magically" appear which you can collect or just add more money) or just store for later (classic storage shelves in separate room), also some expensive item could appear from time to time which is being offered to you (either via merchant or special shelves).
Maybe even option of expanding store with repair shop (which naturally costs tons of cash) but you get repairman and shelves on which you place items you want to recycled and items you want to be repaired (which you can pick up fully repaired in a few days)... this would solve need for
recycle en masse and lot of micromanaging with recycle and repair after early game and player had lots of money and loot.
But as long as feature is added allowing us to recycle items
en masse it shouldn't be a problem, one of the main reasons for gathering tons of crappy lot is to convert it to repair kits, also if any junk left behind never disappears I have no problem with multiple trips (few extra containers to store excess lot in one place wouldn't hurt)
Limiting inventory size (instead of just weight which can be carried without penalties) would be bad since that one is always a nightmare to work with.