In the Players Handbook in the Encumbrance section there is a table with three columns: Encumbrance, Movement, and Reaction and Initiative. For movement of 12" Reaction and initiative says "normal or better,6" says slowed, and 3' to 4" says "slowed greatly". There are no additional details on what slowed or slowed greatly mean. In the Dungeon Masters Guide under initiative it says: "The dexterity or speed of individuals or weapons is not considered in the 1 minute round except as hereafter noted." But unfortunately nothing is hereafter noted, and there is nothing in there about encumbrance. It looks like a thread that died in editing, or just abandoned. Has anybody ever used initiative adjustments based on encumbrance?
from page 104 of PLAYERS HANDBOOK: The initiative check is typically made with 2 six-sided dice, ld6 for the party, and another of a different size or color for the creatures encountered. This check is made each round of play where first action is a factor. Because a round is a full minute long, dexterity seldom is a factor in the determination of which side acts first. However, if one group is slowed or hasted, or one or more members of the group are, the initiative will always go to the non-slowed or hasted side. In most other cases, the group with the higher die score will always act first. For effects of initiative in fighting, see COMBAT hereafter.
I play it as who is slower like the spell. So "slowed greatly" loses to "slowed".
So far this campaign I've been just eyeballing it, and I set a flat rate for how much treasure each character could cary out of the dungeons, plus bags of holding. But they've always been a quick trek away from camp, or town, or the magic-user has been teleporting the max she can teleport with back to town, etc. Moving into D1 is completely different, so I'll be looking at it much more closely.