In this, pets dmg will not change with weapons.  In live their dmg max would be double the weapons displayed damage, not to include dmg bonus.  They would also allow them to hit for a higher avg dmg.  This is not so in this, the only effect you get from giving them weapons in this is the proc.  I would recommend Fiery Defender as it has a 100dmg nuke and 500pt group heal and is fairly imbalanced for a pet weapon.  Just remember they lose all equip/buffs when you zone and wont accept them in nexus or surefall glade.  On a side note, armor still works on pets for both ac and stats/hps.
Also, your pet will not proc its self proc or weapon proc if it doesnt have los; this even applies if he is in melee range but inside a wall or around a corner.