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How To Divide Up Loot?
+1 for the "Let the players play!" vibe. Too many of the other answers here give the impression that the GM's role is to control the game. To augment a bit, if the characters are embarrassed by their performance, but the players aren't experienced enough to see how the game mechanics of these items could help them, or if the players are embarrassed by their character's lack of prowess, then educate them out-of-game. And if the imbalance makes their encounters harder, they'll look for solutions. The "deux-ex" approach is probably too heavy-handed.
Why “roll for initiative” in Pathfinder?
+1 for mentioning the monsters. Nothing quite so entertaining in a round-by-round initiative game than the collective wince of a party who've just been told the monsters go first this round...