stupid question but does adding more monster power make better item drops?
Sort of. Here are the relevant sections from the Monster blog (which I'd encourage you to read):
Starting at MP1, each level of Monster Power will increase monster damage and health by a scaling amount depending on difficulty. To reward your audacity, your hero will receive bonuses to experience, Magic Find, and Gold Find (which will stack above the 300% cap).
For Normal, Nightmare, and Hell, the bonuses look like this: (click)
In Inferno, in addition to increased experience, Magic Find, and Gold Find, whenever a monster dies and drops an item normally (whether it be gold, a potion, or a piece of gear), the monster also has a chance to drop an additional bonus item. The chance to drop a bonus item will scale up with each MP level as detailed in this table: (click)
In Inferno at Monster Power 1 or greater, monsters in every Act will also be bumped up to level 63 and share the same high-end item drop rates. This means that no matter which act you're progressing through, the monsters in that act will all have the same shot at dropping items level 61-63, including crafting recipes, Legendary items, and set items.
I also posted some more information about how the bonus item feature works here, if you want the gritty details.