Not sure if this is new or old, but last night playing a game, I dropped an item for my gf to pick up. She picked up the item not realizing her inventory was full. The item simply disappeared altogether. She thought she had picked it up since the chest disappeared from the ground.
It would be nice to report a "your bags are full" error of some sort and prevent the picking up of that item (a la WC3) rather than just eating it.