Ahh this is a classic, though I prefer my Genesis Emulator version of Unchartered Waters, much better graphics.
Sextant and Telescope are the only items you will really need. The weapons just simply affect the damage you do when you hand-to-hand combat with another ship i.e. how many of thier crew you kill.
The Amulets are good luck charms, like your figurehead, they mean less chance of storms and seaweed(which is evil!!!) and less chance of getting as much damage from swords and evil seaweed.
Then youve got miscellanous stuff like jewelry, this is only useful for selling to shop keepers or for giving as gifts to the princess.
Oh, and in Venice you can buy a........ erm....... oh yeh a speculum, that will accurately tell you your longitude/latitidue, which you need when searching for buried treasure, though that is expensive so that can lower your load of cash.
Also you can store gold in the palace so you can have a lot of gold.
One tactic which is quite useful is too invest in ports, buy sugar and sell in London, buy wool, go to Antwerp to the south and sell the wool, buy sugar and invest in the industry and then sell at London....... etc...
Once an investment in a port reaches a certain number you can build the better ships, until you manage to get the ultimate, the heavy galleon. (though you do need around a sailing level of 10 or so to effectivly sail it.)
A good strategy guide which got me out of sticky situations was this one
Unchartered Waters Strategy Guide/FAQ