I've seen 2 legendary drops on my barbarian, both of which were okay for the level, and quickly replaced after. Out of the group of 5 people I've played with regularly, all of whom are level 60 and have finished at least Hell difficulty, we've seen one set piece drop.
Also, regarding the grind/AH - the main grind I remember in D2 was boss runs. Load up before the boss, maybe have to do a level of a dungeon, then kill Mephisto or whoever. Quick, generally painless, couple pieces of gear. In order to grind in D3, it's pretty much mandatory to load up enough in advance to kill 5 random bosses for stacks of the gold/magic find buff, THEN clear to the boss, THEN kill it, meaning a much bigger investment of time. And yeah, like Bubble said - I don't remember bosses (or the packs of mobs at the very start of an act, for fuck's sake) being completely, bend-you-over-and-fuck-you-up-the-ass impossible if you don't have a set of gear that's better than what you can farm ahead of them.
Might be different for other classes, but the beginning of Act 2 feels completely, punishingly impossible for my Barbarian right now, and I'm down to 3 or 4 pieces that aren't level 60. It's stupid.