Login, and move the character a fair distance, collecting items along the way. Wait for a server disconnect. Log back into server once available. Observe character back in the initial spawn position of the last play session, and that any items taken are now gone. Move the character along the same path taken before, and notice that items taken before are no longer in place, while familiar items left behind remain as they were. Collect new items and continue to move player a fair distance. Memorize inventory, and then log out by hitting escape, and selecting "EXIT." Log back in and notice player in same position as when manually logging out previously. Continue to make progress until server disconnect event occurs. Log back in, and notice that player character and position were again reset, but this time to the position where the last manual logout took place.

Repeat steps as needed to confirm. I have made seven such voluntary logouts to save my position and inventory progress, and experienced maybe twelve server disconnects over six hours of play today.

Some Item duplication also occurs as a result of this bug, but it seems tied to manually logging out as soon as server disconnect becomes apparent.
Items taken by player that are lost to a disconnect, seem to remain taken from their original spawn locations, and have essentially vanished.