A 2 hand axe my girlfriend had found and gemmed was causing the issue. When ever she dropped it or traded it - if one of us picked it up - went to a new location or quit the game everyone would get disconnected and ANYTHING that session would be rolled back. After a whole night of uncertainty we finally found out what it was.
Is this something you guys are aware that is going on?
She ended up breaking up the item at the blacksmith and quitting the game and it finally saved - the bugged item is gone and we don't have to worry any longer - but wow! imagine if this was a good item?