Before 1.20 the combine option through the inventory menu with held, vicinity and equipped items was fast, easy and user friendly. I hope the current state is an unintended interaction if not I am afraid the immersion and play-ability is greatly affected at least for me.
Main Issue:
You can no longer repair items in your hand, on the ground or equipped from the inventory menu.
You can't stack items
You can't interact with items in the vicinity/inventory menus.
(example)You can't open a can on the ground with a can opener in your hand using the vicinity menu.
(Hold) to combine is not working as intended.
As a note, the vicinity menu for crafting, combining and repairs is the most user friendly way of getting things done. Placing items on the ground and looking at them to effect repairs etc (opening cans, interacting with bullets) can be tedious while using a controller. Also as a side note, console feedback needs a definition between mouse and keyboard play and controllers.