Normally, when you drag items onto other items, the items switch places. However, when you drag something you've equipped onto an item that can't occupy the slot the first item was in, it seems that the second item just disappears!
For example, if I drag an equipped helmet on top of a wooden stake, the wooden stake disappears.
Apologies for the noise if this is a known bug and fixed in the latest patch, which I haven't played with yet.
