Dragging one item to another item results in the items swapping place OR being combined via the crafting system. This has been pointed out again and again on the forums as being an utterly horrible system.
The latest problem im having with it - dyes. Im trying to dye a robe, but the only way to get the dye to interact with the robe is to be wearing it first. Wearing the robe requires having a high intelligence since its classed as a mage item. If none of your mages have crafting, you appear to be shit out of luck for dyeing the robe.
Anyone else found this to be the case?