Magic Items in combat transformation?

Unfortunately it doesn't work that way in Dom2, unless I'm just very unlucky.

Items when shapechanged in a province with a lab will return to the lab (Really easy to test this by making an item putting it on your human form dragon and changing and see if it's in the lab after you change back)

And during battle they drop them, who knows where, then after the battle I think you have the normal (or hopefully better) chances of picking up equipment. Though it doesn't seem odd to me that when a little wizened sage transforms into a huge red dragon, he busts out of his armor like the Hulk.