I don't think dwarves being buried with your masterwork adamantine armor and weapons would be a problem, considering weapons and armor assigned to dwarves do not become their property (property of the state). That being said, I can imagine down the road when the economy is worked on further dwarves might buy and own equipment of their own. At any rate, property items are what would be buried (I would also like to see inheritance of some kind as well), not public property. Such things are not normally controllable by the player anyways (can't sell the clothes of a living dwarf in the current version, to my knowledge) so I don't think it would impact the game greatly in any manner that would be frustrating to the player. It would be realistic and less creepy as well.
Some other related suggestions:
-Dwarves should have the possibility of passing down some items to their decendents.
-Coffins should act as containers for these items-if they own too many items to fit in a coffin, the remaining items will be placed in their tomb, either in containers or on the floor (items they are attatched to, were the most valuable will go in the coffin with them) If there is still too many items, the remainder will be passed on to their surviving family, or become public property if none are living. (anything they are wearing at the time of their death will be exempt from becoming private property).
-Looting these tombs later as an adventurer should be possible.
-unscrupulous dwarves or outside npcs should also steal during fortress mode-traps will be an effective method of preventing this.
-ghosts might appear and haunt/curse the robber if the deceased dwarf was especially greedy or if the stolen object was very expensive or otherwise precious to them.