I used to play with my Witch Doctor this morning and tried to kill Diablo without gear in Hell difficulty for the achievment.
I had all my gear in my inventory slots and I didnt wear anything. When I died my weapon droped from my dead body to the ground! I retried the boss fight hoping that the weapon will be still there but it was gone!
So there are 2 bugs here.
1. Droped item upon death.
2. Loot in Diablo's room vanishing if you retry to kill him (assuming you failed before).
Lastly since I dont know what kind of issue is that and after all those hours of gameplay on Diablo 3 I encountered this for first time, I want my weapon back cause I spended a large ammount of gold to buy it and lots of hours to get the gold...