I disagree (shocker, right?) that adding narrative fluff to generic rewards is better than cultural rewards.
1) The generic rewards can be optimized mathematically. Whereas it's hard to quantify the benefit of some of the better-designed cultural weapons and armour.
2) TOR already (in my mind) leans heavily toward mechanics that are highly repetitive and deterministic, but observations to that effect are often met with "Just narrate it colorfully!" Others may disagree, but I tire of having to embellish simplistic mechanics. I want a game, not a roleplaying cue generator.
3) Traditionally, cultural rewards were designed to have synergy with the weaknesses of the cultures. So, for example, Hobbits aren't great at combat, so they got a virtue to help with archery, and a reward to help with close combat. King's Blade may have overshot the mark, but that's the idea. Generic rewards, on the other hand, can't really be designed this way, because in the hands of an unintended culture can be OP.
4) The two systems can co-exist, so adding cultural rewards doesn't have to detract from the value of generic rewards. As long as "trap choices" (such as King's Blade) are avoided.
I do agree that there is some awkward fluff to the 1e cultural rewards, e.g. the incongruity of around half of all adventuring Hobbits (based on my own experience playing TOR) somehow getting their hands on one. But that's an issue with implementation, not concept.
100% agree with you, not everything can be fixed with "insert narrative". In the end, this is a game and a game needs both narrative and mechanics to be interesting, otherwise, it's just theatrical acting