With luck applied you get slightly more gold, and items with higher intensity properties and a possibility of more properties, in other words a chance at getting something better than a "major magic item" or "lesser artifact."
I don't think it affects the cursed / luck-100 / brittle / cannot be repaired. For those I think you have to fight higher quality monsters, e.g. Cora, or the Despise corrupted wisp. I don't know how "higher quality monster" is calculated. Might be fame or karma or number of hitpoints or even assigned independently of those.