My hand slot froze making it unable to equip items. The character would always stay with fists and the item in question would stay in the inventory (able to be moved around). True for both drag&drop and hotbar usage.

However, trying to drag a stone knife into the hand slot replaced environment interactions with the knife actions (cut off, chop etc.) until the knife was put on the ground (from inventory) - pressing the red X did nothing. Even then attacking would cause the character to punch with his fists.

After relogging my character was holding the item I tried to equip last (via hotbar).