1) Gold wipe. Old gold will buy rares before its deleted. Along with wipe drastically reduce gold on monsters across the board.
2) Remove insurance.
3) Increase items drop intensity, lower rate of drop. Same goes with chests.
4) Revamp crafting so that players can craft magic items they want (within ranges allowed by skill) with ingrediants dropped on mid to low monsters, and grown, and collected with lj and mining.
5) change all of tram (cept housings areas) with different spawns, and land.
6) redo rule sets all across the world. Add safe zones, and danger zones on EVERY facet, so that every facet will have both open pvp and non pvp areas.
7) Readjust spawns and resources and aligned with the valuable things 80% on pvp areas, 20% non pvp areas, so that people who absolutely refuse to risk themselves can still have valuable areas to access, but the majority of the loots, risks will have to be taken.
8) New faction. A police force type of faction. Give them tools to actually deal with pks. Allow the higher ups the ability to "jail" reds, so rather than dying the red is teleported to a special area. Fill it with npc guards that can be killed by the captured red, but it takes time. Once the npcs are killed the reds can escape.
That was the WHOLE problem in the past, there was no way to keep the pks at bay even for 15 minutes.
This way a dedicated squad of anit-pk's could keep an area free of reds, so that non pvp players could hunt/work a spawn or whatever in peace.
This would offer fun, and pride for the anti's, as well as profit, as a dedicated protection squad could sell their services to larger non pvp guilds for either gold or a cut of the pvm spoils.
Risk vs reward: check. Good fights with meaning for pvpers with out stupid item hand out gimick: check. Pvmers having fun, and not feeling dominated: check.
And that is how I would change UO.