To make sure you don't get too high of Loyalty, you'll typically want to avoid taking quests that raise your reputation with your element. If your Loyalty goes to high, you can try bringing it down by attacking members of your own element, or taking on quests that hurt your element. However, Loyalty is a good trait in most cases. Until certain items are released, you are limited to wielding one element. If you want to stay with the element you currently have, having good Loyalty means that people won't be able to force you to "convert" to another element. Remember, Light elementals get a bonus for converting other elementals to Light, so that is a constant danger.
As for weapons, that's being developed. Mostly, it'll have a base stat, and dice will be rolled to determine how much damage you deal in relation to the original stat. Strength will increase the damage of the weapon. Legendary weapons will probably require you to have high stats to wield it, but reward you with stats in some way.
You can increase Karma by choosing not to kill people, and being charitable and goodwilled toward others (this also helps Empathy, but is quite distinguished in differences). Karma eventually controls what kind of quests you take on, and can also make it so that you can't do things that hurt other people.
Empathy is gained by being in a group of people, traveling around and helping people, gaining and raising pets, and, again, letting people live. If it gets too low, you have a character that will consistently kill. If it gets too high, you'll refuse to kill people, but be extremely popular as a master of pets.
Getting a defensively based character is an allowable stance for this game. You'd want stats such as Defence and Stamina, as well as Agility so you can dodge the hits that could knock you out in one blow.
